Insurance Coverage Checklist

When water comes through a ceiling from the unit above, a lot of boards would say the association’s insurance pays to fix it. That is usually only part of the answer. Three policies are involved in a claim like that — the association’s master policy, the owner’s own policy, and the board’s coverage for itself — and the trouble is in where each one stops.

This checklist lays out those three, using Illinois as the worked example because its law puts most of this in one section, and gives you space to write down what your own policies actually say.

Where the master policy stops

In Illinois the master policy covers the common areas and the units for the full cost to rebuild to today’s code — not what the building would sell for. But “the units”, unless the board has decided to cover more, generally means the bare walls, floors and ceilings. Anything an owner installed or upgraded — flooring, cabinets, fixtures, appliances — is on the owner. And even for what it covers, the master policy pays only after the deductible.

Water is where the surprises live. To an insurer, a burst pipe, a slow leak, ice backing up and water coming in from outside can each be treated differently, and some aren’t covered unless they’ve been added. So the checklist doesn’t ask whether you’re covered for water damage. It asks about each way water could get in, one at a time, and the answers should come from the policy wording and your agent, not from memory.

Decide the deductible before the claim

If the deductible is $10,000 and the leak costs $15,000, somebody has to come up with the other ten. In Illinois the board picks who: the association as a common expense, the owner whose unit the damage started in (after notice and a chance to be heard), or the owners whose units were damaged. Decide it now and the answer is already there when a leak happens. The board can also require every owner to carry coverage for damage that starts in their unit and spreads — including the neighbour’s deductible.

Then put the whole answer in one statement — what the master policy covers, what owners carry themselves, and who pays the deductible — and send it to every owner. The sheet has a place for it, and for the date it went out.

The board’s own coverage

D&O defends the board when someone sues over a decision it made — how a rule was enforced, a disclosure package, a contract. It doesn’t cover something a board member did knowing it was wrong; that’s what the fidelity bond is for. In Illinois an association with six or more units needs one, and its amount isn’t the board’s choice: it has to cover everything the association holds, reserves included. It won’t grow with the reserves unless someone asks.

Once a year

These may be one package or separate policies with different renewal dates. Either way, go through all of them once a year with whoever handles the association’s insurance, using the renewal questions on the sheet. Two are on the board rather than the agent: making sure every vendor paid more than $10,000 a year names the association as an additional insured on their certificate, and asking every owner for proof of their own coverage.

The law also builds in two protections you don’t have to ask for: the master policy can’t sue an owner to recover what it paid, and when both policies cover the same damage, the master policy pays first.

Not legal or insurance advice. Your state’s law and your own declaration and bylaws decide the details — confirm with your agent and your association’s attorney.