by Nancy Ayers

Allstate, Farmers, Travelers, GEICO… there are many companies that provide personal insurance protection. How do you know that you have purchased the right coverage? A quick review of your insurance coverage can help to ensure that you will be covered in the event of a loss.

We recommend that you purchase  HO-6 All Risk coverage, which includes ..

1) Personal Liability Insurance – Unit Owners are required to maintain a minimum limit of $500,000 of liability coverage.  Liability provides protection against bodily injury and property damage claims for which you or your family members may be legally responsible.

2) Real Property and/or Improvements and Betterments Coverage – To determine the adequate limit for this coverage, you will need to calculate the estimated cost to replace your fixtures and improvements including flooring. Be sure to provide enough protection to rebuild in event of a total unit loss. We would recommend a minimum of $50 per square foot of living space.

3) Personal Property – The limit used for your personal property coverage will be the cost to replace your furniture, clothing, electronic equipment and other items. Specialty items such as jewelry and fine arts may need to be specifically scheduled.

4) Loss of Use and/or Additional Living Expenses – This coverage provides reimbursement for hotel or rental expenses if you cannot continue to live in the building due to an insured loss.

5) Loss Assessment and Deductible Assessment Coverage – Loss Assessment coverage reimburses the unit owner for damages exceeding the association’s policy limits. Deductible Assessment coverage reimburses the owner for deductibles paid by the association and charged back to the owner. It is recommended that owners carry $10,000 deductible assessment carry coverage.

Be sure to review your coverage with your insurance agent to determine if you are purchasing adequate coverage. If you are renting your unit, your insurance policy may include exclusion for property damage caused by tenants. Verify that your tenants have purchased $500,000 of renter’s liability.

Frequently Asked Questions

My unit suffered damage from a common area pipe break. I had to replace the wood flooring in my kitchen.   Shouldn’t the association’s insurance carrier be responsible for my flooring?

The Illinois Condominium Property Act (section 12- insurance) states unit owners are responsible for insuring improvements and betterments including flooring. In addition, a unit owner waives his or her right to subrogation –  the attempt to recover money from the association. The owner will need to file a claim under unit owners insurance for reimbursement.

We recently had a fire in our unit and the common area hallway was damaged. The majority of the hallway damages were covered by our association policy. My unit owner policy paid for the damage to my unit. The board has assessed our unit for the $10,000 association property deductible. Why do we have to pay the deductible?

Damage to the common area caused by a unit owner would be covered under the association’s policy. However, the condominium association insurance carrier also waives its right of subrogation under the policy against any unit owner. The act does allow the board, after notice and an opportunity for a hearing, to charge the deductible amount to the owner who caused the damage or from whose unit the damage was caused or originated. Be sure to include deductible assessment coverage on your unit owner policy.

The bathtub in the unit above mine overflowed and caused significant damage to my bathroom cabinets and flooring. The condo act states that the board may mandate liability insurance to cover the personal liability of another unit owner. We are required to purchase a minimum of $500,000 of liability insurance. Why did my neighbor’s insurance carrier only offer to replace my bathroom cabinets and flooring less depreciation ($7,000) when the cost to replace with new cabinets and flooring is $10,000. 

You have filed a liability claim against your neighbor based on negligence. The insurance carrier is only obligated to reimburse you for replacement cost less depreciation in Illinois. In order to obtain full replacement cost, you should file the claim with your own unit owner’s policy and ask your company to subrogate against the insurance carrier of the unit owner that caused the loss. Or, in a variation of this commonly-asked question ..

My neighbor’s insurance carrier has offered to reimburse me for the amount of my deductible. Isn’t the insurance carrier liable for the full replacement cost of my cabinets and flooring?

Each insurance carrier has a different interpretation of the Illinois Condo Act. Many insurance carriers cite a waiver clause between unit owners included in many declarations in Chicago, along with wording from Sec 12 of the Illinois Condominium Property Act that the liability must include the deductible of the unit owner. The wording is included in the PTCA Declaration on page 16.

Finally, we recommend that unit owners report property damage losses to their own insurance carriers to guarantee full replacement cost coverage.

Nancy Ayers is our insurance broker, working for Mesirow Financial.