Illinois condo insurance requirements come from Section 12 of the Illinois Condominium Property Act (765 ILCS 605/12), which obligates every condominium association to carry four types of coverage: property insurance on the common elements and units, commercial general liability insurance of at least $1,000,000, a fidelity bond covering everyone who handles association funds, and directors and officers liability coverage.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance No insurer can issue or renew an association policy in Illinois unless it includes all four. What the master policy does not cover, and what the board can choose not to cover, is what each unit owner needs to insure personally.
The Four Coverages the Association Must Carry
Property Insurance on the Building
The master policy must insure the common elements and the units, including limited common elements such as balconies and patios assigned to specific owners. Coverage has to equal the full insurable replacement cost of the property at the time of purchase and at every renewal, and it must include the added expense of rebuilding to current building codes after a loss. The Act requires “special form” coverage, the broadest standard form, which covers all risks not specifically excluded.
One exclusion matters to every owner. The master policy does not have to pay for improvements and betterments installed by individual unit owners. Upgraded cabinets, replacement flooring, custom built-ins, remodeled bathrooms: none of that has to be restored by the association’s insurance after a covered loss.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
General Liability at $1 Million Minimum
The association must carry commercial general liability insurance with a minimum limit of $1,000,000. The board can set a higher limit if it decides more protection is warranted. This policy covers claims arising from the ownership, use, or management of the property, and it insures the board, the association, any management agent and its employees, and everyone acting as an agent. Unit owners are additional insureds, but only for claims connected to the common elements. Something that happens inside your unit is not covered by the master liability policy.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
Fidelity Bond
Any association with six or more units must obtain a fidelity bond covering every person who handles association money, including the management company and its employees. The bond must equal the full amount of association funds and reserves in the custody of the association or its management company. Management companies handling those funds must also carry their own fidelity bond, and the association has the right to file a claim directly against the management company’s bond.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
Directors and Officers Liability
The board must obtain D&O coverage at a level it considers reasonable, unless the declaration or bylaws set a specific amount. Coverage has to extend to all contracts and decisions made by the board in its official capacity, and it must cover past, present, and future board members while they act in that role.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
Where the Master Policy Stops: Bare Walls vs. All-In
The statute lets the board of managers decide how far into each unit the property coverage reaches. Section 12 says coverage includes “the bare walls, floors, and ceilings of the unit” only “except as otherwise determined by the board of managers.”1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
Under a bare walls approach, the master policy insures only the structural shell: exterior walls, the slab or subfloor, the ceiling structure. Everything from the drywall inward, including flooring, cabinets, plumbing fixtures, and appliances, falls to the owner. Under an all-in approach, the master policy also covers permanent fixtures and interior finishes as originally installed by the developer. Improvements you add after that stay yours to insure either way.
Before you buy your own policy, get a copy of the association’s insurance certificate and confirm where the master coverage ends. That boundary sets the starting point for how much personal coverage you need.
Who Pays the Master Policy Deductible
Master policy deductibles on condo buildings can reach tens of thousands of dollars, and the Act gives the board three ways to handle one when a claim is filed. It can pay the deductible as a common expense shared by all owners. It can assess the deductible against the owner who caused the damage or from whose unit the damage originated, after giving that owner notice and a hearing. Or it can require the owners of the affected units to pay it.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance
The practical consequence: if a pipe bursts inside your unit and floods three floors below, the board can charge you the full deductible. Your declaration or bylaws may specify how deductibles are handled and override the board’s discretion, so read them.
What You Need to Insure Yourself
The Condominium Property Act does not require individual unit owners to carry insurance. The gap between what the master policy covers and what it would cost to make yourself whole after a loss is wide enough that going uninsured is a serious financial risk, and most mortgage lenders require personal coverage as a condition of the loan anyway.
The HO-6 Policy
The standard personal condo policy is called an HO-6. It typically covers your personal belongings, interior improvements and betterments the master policy excludes, personal liability for injuries or damage inside your unit, and additional living expenses if your unit becomes uninhabitable.
Improvements and Betterments
Anything you have added or upgraded beyond the original developer finishes is explicitly outside the association’s master policy.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance Add up what you have spent on renovations, hardwood floors, kitchen work, or bathroom upgrades, and make sure the dwelling coverage limit on your HO-6 reflects that number.
Personal Liability
The association’s liability policy responds only to claims connected to the common areas. A guest who slips inside your unit, or a dog bite on your balcony, falls to your personal liability coverage. HO-6 policies typically start at $100,000 in liability, and higher limits are inexpensive.
Loss Assessment Coverage
When a covered loss exceeds the master policy’s limits, or when the deductible has to be shared out, the board can levy a special assessment on all owners to cover the shortfall. Loss assessment coverage on your HO-6 reimburses you for those charges. Standard policies often include only $1,000 to $5,000 of it, which is not enough to absorb a major event. Carrying $25,000 to $50,000 is worth considering in older buildings or higher-risk areas.
When the Association Is Underinsured
If a loss exceeds the association’s coverage, the board can levy special assessments against all unit owners to cover the gap. Every owner owes their proportionate share of common expenses, and an unpaid assessment becomes a lien on the unit that takes priority over nearly all other liens and encumbrances, including most mortgages. The association can also charge interest, late fees, and reasonable attorney fees to collect.2Illinois Department of Financial and Professional Regulation. Illinois Condominium Property Act – As Effective August 15, 2025 An uninsured catastrophe at a building whose board cut corners on coverage can produce five- or six-figure assessments per unit.
The Act does not spell out a specific penalty for associations that fail to carry the mandated insurance, but owners are not without recourse. Section 9.2 provides a general remedies framework for defaults under the Act or the condominium instruments, and a board’s failure to insure properly is a default of its duties under both Section 12 and Section 18.4.3Illinois Department of Financial and Professional Regulation. Illinois Condominium Property Act – As Effective January 1, 2025 Owners can seek judicial intervention to compel the board to comply.
Getting the Details From Your Board
Section 18.4 charges the board of managers with obtaining “adequate and appropriate kinds of insurance” as an ongoing duty, not a one-time task.4Illinois General Assembly. Illinois Code 765 ILCS 605/18.4 – Powers and Duties of Board of Managers Coverage has to be reassessed as property values, construction costs, and building conditions change.
The association is also required to make its insurance information available to unit owners, including policy details and coverage amounts. Request the certificate, review it annually after each renewal, and check the deductibles, the limits, and whether the board is using a bare walls or all-in approach. Beyond the four required coverages, the declaration may require, or the board may choose to add, workers’ compensation (if the association has employees), employment practices liability, environmental hazard coverage, or equipment breakdown insurance.1Illinois General Assembly. Illinois Code 765 ILCS 605/12 – Insurance Whatever the master policy does not reach is what your HO-6 has to.