Illinois HOA Insurance Requirements

Section 1: Overview — How HOA insurance is regulated in Illinois

Illinois imposes prescriptive association insurance requirements on condominiums through the Condominium Property Act, so covered condominiums don't sit in a covenant-only posture. The insurance section, 765 ILCS 605/12, requires replacement-cost property coverage on the common elements and units, commercial general liability of at least $1,000,000, a fidelity bond for associations with six or more units, and directors-and-officers coverage.¹ By contrast, the Common Interest Community Association Act, 765 ILCS 160, which governs non-condominium communities such as townhome and single-family homeowner associations, carries only one statutory insurance mandate: fidelity insurance for associations with 30 or more units under 765 ILCS 160/1-55.² It doesn't statutorily mandate property, liability, or D&O coverage, which for those communities run off the declaration.³ Whether a non-condominium community is even covered by the Act turns on statutory thresholds: an association organized under the General Not For Profit Corporation Act with 10 or fewer units or annual budgeted assessments of $100,000 or less stays exempt unless it elects coverage, in which case it's declaration-driven.³ The City of Chicago's Condominium Ordinance, Municipal Code Chapter 13-72, supplements the state Act within city limits but functions as a disclosure and records overlay rather than a coverage mandate.⁴ Fidelity and D&O obligations therefore differ sharply by community type and need confirming against the correct statute. Illinois belongs in the comprehensive prescriptive category for condominiums, apart from UCA/UCIOA states and from covenant-primary states. The sections ahead lay out the statutory framework, how coverage gets allocated, and what's happened recently.

Section 2: The statutory insurance framework

2A. The Condominium Property Act insurance section (765 ILCS 605/12)

Section 12 of the Condominium Property Act governs insurance for every condominium association in the state and works as a coverage floor: no policy may be issued, delivered, or renewed to a condominium association unless it includes the required coverages.¹ First, property insurance must cover the common elements and the units, including the limited common elements and, except as the board of managers determines, the bare walls, floors, and ceilings of the unit, on a special-form basis, at not less than the full insurable replacement cost less deductibles.¹ The statute requires building-code-upgrade coverage — demolition costs and increased cost of construction — with the combined total no less than 10% of each insured building value or $500,000, whichever is less.¹ Second, commercial general liability must be carried in a minimum amount of $1,000,000, or a greater amount the board deems sufficient, insuring the board, association, and management agent.¹ Third, an association with six or more dwelling units must maintain a fidelity bond covering persons who control or disburse association funds, in the full amount of association funds and reserves, and the board must obtain D&O coverage at a level it deems reasonable, extending to defense of non-monetary actions, breach of contract, and decisions related to the placement or adequacy of insurance.¹ The statute also addresses deductibles, waiver of subrogation, primary-insurance status of the master policy, and the trust treatment of proceeds. These stand as mandatory minimums; the declaration can't reduce them, though the board determines whether unit coverage extends beyond bare walls and may add coverages. The section was last amended by Public Act 98-762, effective June 1, 2015, and hasn't been amended since.⁶

2B. The Common Interest Community Association Act and coverage thresholds

Non-condominium communities answer to the Common Interest Community Association Act, 765 ILCS 160. A common interest community is real estate other than a condominium or cooperative in which owners must pay for maintenance, insurance, or taxes of common areas administered by an association.³ Unlike the Condominium Property Act, this Act imposes only one insurance mandate: fidelity insurance for associations with 30 or more units under 765 ILCS 160/1-55, covering persons who control or disburse funds, plus a management-company fidelity bond.² It doesn't require property, liability, or D&O coverage, which get left to the declaration. Coverage of the Act itself runs threshold-driven: under 765 ILCS 160/1-75, an association organized under the General Not For Profit Corporation Act with 10 or fewer units or annual budgeted assessments of $100,000 or less stays exempt unless a majority of directors or members elects coverage, and associations of 10 or fewer units or budgeted assessments of $50,000 or less carry an additional exemption from the fidelity-insurance section.³ Small exempt communities answer to their declaration and the nonprofit code. Within Chicago, the Condominium Ordinance adds local disclosure and records duties for condominiums.⁴ The practical implication: classify the community and confirm coverage status before analyzing obligations.

2C. The declaration, corporate law, and the federal and market overlay

Even in a prescriptive state, the recorded declaration and bylaws interact with the statute. For condominiums, the declaration allocates maintenance responsibility and determines whether unit coverage extends beyond the bare walls, floors, and ceilings, but it can't fall below the Section 12 minimums.¹ For common interest communities, the declaration sets nearly all coverage because the Act mandates only fidelity insurance.² The General Not For Profit Corporation Act of 1986, 805 ILCS 105, permits indemnification of directors and officers but doesn't mandate D&O insurance.⁷ Separately, a federal and secondary-market overlay applies to associations whose units are financed conventionally or through FHA: Fannie Mae and Freddie Mac require master property coverage at 100% replacement cost, general liability of at least $1,000,000, and fidelity/crime coverage for most projects. Fannie Mae also caps the total deductible for required property perils, stating in Selling Guide B7-3-03 that where a master policy includes multiple deductibles, the total for a single occurrence "must be no greater than 5% of the insurance coverage amount," and NFIP flood coverage is required for buildings in Special Flood Hazard Areas with federally backed mortgages.⁵ These stay lender requirements, not Illinois statute. Market context also shapes coverage: Illinois's dominant exposures run to severe convective storms — wind, hail, tornadoes — and winter perils — snow load, ice, frozen and burst pipes — with wind-and-hail deductibles common. Per NOAA's National Centers for Environmental Information, Illinois recorded 128 billion-dollar weather and climate disasters from 1980 through 2024, the large majority of them severe-storm events. Urban and riverine flooding along the Chicago metro and the Illinois and Mississippi rivers brings the NFIP into play, and Chicago's dense high-rise stock concentrates hail exposure: Cotality's 2026 Severe Convective Storm Report identifies roughly $1 trillion in replacement-cost value at moderate or greater hail risk in the greater Chicago area, a concentration it labels the "Chicago Anomaly." Illinois carries no coastal windstorm exposure. None of these market realities amounts to a statutory mandate.

Section 3: Coverage allocation and compliance obligations

A. Association coverage obligations

For condominiums, 765 ILCS 605/12 requires the association to carry replacement-cost property insurance on the common elements and units, $1,000,000 commercial general liability, a fidelity bond if the association has six or more units, and D&O coverage — all statutory mandates applicable to every condominium.¹ For non-condominium communities covered by 765 ILCS 160, the only statutory coverage obligation is fidelity insurance for associations with 30 or more units under 765 ILCS 160/1-55; property, liability, and D&O coverage run declaration-driven for those communities.² Small communities below the 765 ILCS 160/1-75 thresholds carry no statutory insurance mandate and answer entirely to their declaration.³

B. Coverage allocation between association and owners

For condominiums, the statutory coverage standard reaches the bare walls, floors, and ceilings of the unit unless the board determines otherwise, so master coverage generally excludes improvements, betterments, and personal property — the owner's responsibility.¹ The statute defines improvements and betterments to include decorating, fixtures, appliances, and built-in cabinets owners installed; if the association insures them, any increased cost may get assessed to the affected units.¹ A unit-owner policy — an HO-6 — typically fills the gap for interior finishes, personal property, loss assessment, and the owner's deductible exposure. The board may, under the declaration, bylaws, or a rule, require owners to carry personal-liability and damage coverage under 765 ILCS 605/12(h).¹ The master policy sits primary where an owner carries other insurance on the same property.¹

C. Deductibles, proceeds, and reconstruction

Under 765 ILCS 605/12(c), the board may pay a deductible as a common expense; assess it, after notice and a hearing, against the owner who caused the damage or from whose unit the loss originated; or require the affected units to pay it.¹ Property-loss proceeds must be adjusted by the association, held in trust by the association or an insurance trustee, and disbursed first to repair the common elements and the bare walls, floors, and ceilings, then to any insured improvements and betterments; owners see proceeds only if a surplus remains.¹ An owner's loss-assessment exposure includes the deductible chargeback and any damage the required insurance doesn't cover.¹ The Illinois Appellate Court, First District, confirmed the deductible-chargeback authority in Gelinas v. Barry Quadrangle Condominium Association.⁸

D. Fidelity, D&O, and disclosure

For condominiums, the fidelity bond (six or more units) and D&O coverage stand as statutory mandates under 765 ILCS 605/12(a)(3).¹ For common interest communities, fidelity insurance gets mandated only at 30 or more units under 765 ILCS 160/1-55, and D&O runs declaration-driven.² On disclosure, contractors and vendors under contracts exceeding $10,000 per year must provide certificates of insurance naming the association, board, and managing agent as additional insureds under 765 ILCS 605/12(i).¹ Within Chicago, the Condominium Ordinance requires that current association insurance policies stay available for owner inspection.⁴

Section 4: Recent legislative and judicial activity

The single most important fact for this reference page is that the condominium insurance section itself, 765 ILCS 605/12, hasn't been amended since Public Act 98-762 took effect on June 1, 2015; recent legislative movement touches adjacent provisions and the statute's sunset, not the coverage mandates.⁶ The most material recent pressure on coverage has run market-driven. Per the Insurance Information Institute, severe convective storms drove roughly $60 billion in U.S. insured losses in 2024, and State Farm raised Illinois homeowner rates by an average of more than 27% effective August 15, 2025, after reporting that it paid $1.26 in claims for every premium dollar collected from Illinois policyholders in 2024.⁹

A. Recent bills

B. Recent appellate rulings

C. Active legislative debates

Active proposals under the Condominium Property Act, such as SB1914's reserve-designation approach to loss-of-use, remain in committee, and the most consequential near-term pressure on association coverage runs market-driven — convective-storm and water-damage cost — rather than statutory.¹¹

Section 5: National positioning and related coverage

Illinois sits among three broad categories of association insurance regulation. The first covers comprehensive prescriptive states with detailed statutory condominium insurance regimes, notably Florida (Chapter 718) and California (Davis-Stirling); Illinois belongs here for condominiums, with 765 ILCS 605/12 dictating replacement-cost property coverage, $1,000,000 liability, and mandatory fidelity and D&O coverage. The second covers UCA or UCIOA condominium-mandate states, whose insurance provisions key to Section 3-113 of the uniform acts. The third covers covenant-primary states such as Alabama and Arkansas, where the declaration does most of the work. Illinois's distinctive features run to its prescriptive condominium fidelity and D&O mandates, a separate Common Interest Community Association Act that — unlike the condominium statute — mandates only fidelity insurance for larger non-condominium communities, and the City of Chicago Condominium Ordinance overlay. For a multi-state operator entering Illinois, the practical implication is that condominium and non-condominium portfolios must be underwritten to different statutory baselines. Current legislative momentum centers on adjacent provisions and the 2029 sunset extension rather than on changing the Section 12 coverage mandates.

HOA Weekly updates its Illinois Insurance Requirements coverage quarterly, tracking the legislature, the Illinois Supreme Court, and shifts in the property-insurance market. Federal frameworks — Fannie Mae, Freddie Mac, FHA, NFIP, and FHA fair-housing accommodation rules — apply to Illinois associations regardless of the state framework, and a fuller treatment of those rules will follow once that coverage is built out.

1. 765 ILCS 605/12, Condominium Property Act (Insurance) ↩
2. 765 ILCS 160/1-55, Common Interest Community Association Act (Fidelity insurance) ↩
3. 765 ILCS 160/1-75, Common Interest Community Association Act (Exemptions for small common interest communities) ↩
4. Municipal Code of Chicago, Chapter 13-72 (Condominiums), Section 13-72-080 ↩
5. Fannie Mae Selling Guide B7-4-02 (Fidelity/Crime Insurance) and B7-3-03 (Master Property Insurance, 5% deductible cap) ↩
6. 765 ILCS 605/12, source note "(Source: P.A. 98-762, eff. 6-1-15.)" ↩
7. 805 ILCS 105, General Not For Profit Corporation Act of 1986 ↩
8. Gelinas v. Barry Quadrangle Condominium Ass'n, 2017 IL App (1st) 160826 ↩
9. Insurance Information Institute, severe convective storm loss data (2024); Illinois homeowner rate filings, 2025 ↩
10. Public Act 104-0377 (SB1383, 104th General Assembly) ↩
11. Illinois SB1914, 104th General Assembly, Bill Status ↩
12. Truck Insurance Exchange v. Ulman, 2023 IL App (1st) 220804 (Illinois Appellate Court, First District) ↩