For many Illinois associations, insurance is now one of the fastest-growing lines in the budget. Rising construction costs, severe weather and water claims have pushed premiums and deductibles up year after year.
Boards can't control the insurance market. But they can control a lot about how their association buys insurance. Start by knowing what the law requires, then look for flexibility. This guide covers both, along with a renewal timeline, key insurance terms, questions to ask your broker, and what owners should check in their own policies.
Why premiums keep going up
Several forces are driving condo insurance costs:
Construction costs. Rebuilding costs more than it used to, so buildings need higher coverage limits, and premiums follow.
Severe weather. Hail, wind and freeze events have caused large losses across the Midwest.
Water damage. Leaks and burst pipes are among the most frequent and costly condo claims.
Reinsurance costs. Insurers buy their own insurance, and when that gets more expensive, the cost is passed along.
Litigation and liability trends. Larger liability settlements affect general liability and D&O pricing.
Building condition. Older buildings, deferred maintenance and aging systems make underwriters more cautious.
Some of these are out of the board's hands. Others — especially water losses and building condition — are not.
Insurance terms every board member should know
Premium: what the association pays for the policy.
Deductible: the portion of each covered loss the association pays before insurance responds. Some policies have separate deductibles for water damage or wind and hail, sometimes expressed as a percentage of the building's value rather than a flat dollar amount.
Special form: coverage for all causes of loss except those specifically excluded, rather than a list of named perils.
Replacement cost: the cost to rebuild with materials of like kind and quality, without deducting for depreciation.
Insured value: the amount the building is insured for. It should match a current estimate of replacement cost.
Coinsurance: a clause that can reduce a claim payment if the building is insured for less than a required percentage of its value. An accurate appraisal helps avoid this.
Ordinance or law coverage: pays for demolition and the extra cost of rebuilding to current codes after a loss.
Additional insured: a person or entity added to a policy for certain claims, such as the association on a contractor's liability policy.
What Illinois requires
Section 12 of the Illinois Condominium Property Act sets minimum coverage for residential condominiums.
Property insurance. The association must insure the common elements and the units — including limited common elements and, unless the board determines otherwise, the bare walls, floors and ceilings of the units. Coverage must be for "special form" causes of loss and at least the full insurable replacement cost, less deductibles. It must also include coverage to rebuild to current building codes after a loss: demolition costs and increased cost of construction, together at least 10% of each building's value or $500,000, whichever is less.
General liability insurance. At least $1,000,000, or more if the board decides, covering the board, the association, the management agent and their employees and agents. Owners must be additional insureds for claims related to the common elements.
Fidelity bond. Associations with six or more units must carry a fidelity bond covering everyone who controls or disburses association funds, including the management company, for the full amount of association funds and reserves.
Directors and officers (D&O) coverage. At a level the board considers reasonable, unless set by the declaration or bylaws, covering past, present and future board members, the managing agent and employees.
These are the floors. Your declaration may require more.
Optional coverages to consider
Beyond the legal minimums, boards often consider:
Umbrella or excess liability, adding limits above the general liability policy — especially important for high-rises and buildings with pools, roof decks or garages.
Equipment breakdown, covering sudden failure of boilers, chillers, elevators and electrical systems.
Workers' compensation, if the association has employees, and to address situations where uninsured workers are injured on the property.
Employment practices liability, for associations with staff.
Cyber liability, as associations store more owner data and process payments electronically.
Crime coverage, which may overlap with or supplement the fidelity bond.
Flood or sewer backup coverage, depending on the building's location and history.
Each is a judgment call. Ask your broker to explain the risk each one addresses and what it costs.
Where boards have flexibility
Deductibles. A higher deductible usually lowers the premium. But the deductible has to be paid by someone. Section 12(c) lets the board pay it as a common expense, charge it — after notice and a hearing — to the owner whose unit the damage originated from, or require the affected owners to pay it. A higher deductible can make sense if the association has a clear written policy on who pays and owners carry enough HO-6 coverage.
Unit interiors. The association's policy need not cover owner-installed "improvements and betterments" — upgraded flooring, cabinets, appliances and the like. Keeping those off the master policy keeps the insured value, and the premium, down. If the association does cover them, it can assess the extra cost to the affected units.
Required owner coverage. Under Section 12(h), the board can require owners, by rule or through the declaration and bylaws, to carry insurance covering liability and damage to other units originating from their unit. That shifts some risk from the master policy to individual owners' policies.
Coverage limits above the minimum. The board decides whether to buy more liability coverage than $1 million, umbrella coverage, and optional coverages like equipment breakdown or employment practices. These are judgment calls — make them deliberately, with advice.
Weighing a higher deductible
Before raising the deductible, run the numbers. Suppose moving from a $10,000 to a $25,000 deductible saves $12,000 a year in premium. If the building averages one qualifying water claim a year, the association (or the responsible owner) absorbs up to $15,000 more per claim. The savings may still make sense — especially with a clear charge-back policy — but the board should decide with the math in front of it and record its reasoning.
A renewal timeline
1. 120 days before expiration: Review the current policy, claims history and any building changes. Update the building appraisal if it's more than a few years old.
2. 90–120 days: Provide the broker with updated information — completed projects, reserve study, maintenance records, loss-prevention measures.
3. 60–90 days: The broker markets the account to insurers.
4. 30–60 days: Review quotes and options with the broker, including different deductible and limit structures.
5. 30 days: Board votes on the renewal at an open meeting.
6. After binding: Update the budget, notify owners of any deductible change, and distribute the new certificate of insurance.
Questions to ask your broker
What's driving this year's change in premium?
How do we compare to similar buildings in the area?
What would it cost to raise or lower the deductible, and how would that affect owners?
Are there separate deductibles for water, wind or hail?
Is our insured value current? When was the last appraisal?
What loss-prevention steps would make us a better risk?
Are there coverage gaps we should know about?
How many markets did you approach, and what did they say?
Practical ways to manage premiums
1. Start renewals early. Begin 90–120 days before expiration so your broker has time to market the account.
2. Get an updated appraisal. Coverage must meet full replacement cost. An accurate appraisal avoids both underinsurance and paying for more than you need.
3. Reduce water claims. Water damage is a leading driver of condo losses. Leak detection, water heater replacement programs, hose standards and plumbing inspections all make the building a better risk.
4. Maintain the building. Underwriters look at roofs, electrical systems, fire safety and deferred maintenance. A current reserve study and a record of completed projects help.
5. Require vendor insurance. Section 12(i) requires contractors and vendors with contracts over $10,000 a year to provide certificates of insurance naming the association, board and managing agent as additional insureds. Enforcing this keeps vendor-caused losses off your policy.
6. Review claims history. Small claims add up. Talk with your broker about when to file and when to handle a loss internally.
7. Compare structures. Ask your broker about options such as different deductible structures or risk pooling where available.
8. Tell the story. Underwriters respond to evidence. A short summary of recent capital projects and loss-prevention steps can make a difference in how the account is priced.
After a claim
How the board handles claims affects future premiums as well as the immediate recovery:
Report losses promptly, as the policy requires.
Mitigate damage quickly — stopping water, drying, securing the building.
Document everything with photos, invoices and vendor reports.
Keep owners informed about the claim's status and any deductible charge-back.
After the claim, ask what caused it and whether a building change could prevent the next one.
Communicate with owners
Owners see the premium increase in their assessments. Explain why premiums went up, what the board did to manage them, and what owners should check in their own HO-6 policies — especially loss assessment and deductible coverage, if the association may charge back deductibles.
For owners: what to check in your HO-6 policy
Improvements and betterments coverage high enough to replace your finishes and upgrades.
Loss assessment coverage at least equal to the association's deductible.
Personal liability for damage your unit could cause to others.
Water and sewer backup coverage, often an endorsement.
Personal property and additional living expenses.
Ask your manager for the association's current deductible and share it with your agent every year.
Frequently asked questions
Does the association's policy cover my unit?
It covers the building and, unless the board decides otherwise, the bare walls, floors and ceilings of units. Owner upgrades and personal property are generally the owner's responsibility.
Why did my assessment go up because of insurance?
Insurance is a common expense shared by all owners. When premiums rise, the budget — and assessments — rise with them.
Can the board raise the deductible without owner approval?
Insurance decisions are generally board decisions, within the Act's minimums and your declaration. Boards should explain deductible changes to owners, especially if deductibles may be charged back.
Who can see the association's insurance policies?
Current insurance policies are association records owners can inspect under Section 19.
The bottom line
Illinois sets clear minimums for condo insurance. Within them, boards have real choices about deductibles, coverage of interiors, owner insurance requirements and risk management. Making those choices deliberately — starting early, understanding the terms and explaining the result — is the best defense against runaway premiums.
Related reading:
Water Leaks in Illinois Condos: Who Pays for the Damage?
Fiduciary Duty for Illinois Condo Board Members: What It Means and How to Protect Yourself
How Condo Boards Should Solicit and Compare Vendor Bids
How to Tell Owners Their Condo Assessments Are Going Up
Pimmit Run Management helps Illinois condo boards plan insurance renewals, track vendor certificates of insurance and set clear deductible policies. Contact us to learn more.
This article is general information, not legal or insurance advice. Work with a licensed insurance professional and your association's attorney on coverage decisions.
This article is general information, not legal advice. Consult your association's attorney about your specific situation.