Condo Ins Guide IL

Illinois Edition

Condo Association !Insurance Guide

Ron Sirotzki

Ron Sirotzki |Condo Association Insurance Guide | (847) 385-8063

A LETTER TO OUR READERS

!Dear Friend,

!Finding and choosing a reputable insurance agent or agency can be a daunting task, and the impact of choosing an inexperienced one can be damaging if you don’t find this out until the unthinkable happens.

How do you ever find a qualified, competent, professional insurance agent who truly cares more about you, than making a buck…one that you can trust?

You can start by reading this Consumer Awareness Guide. In this fact-filled report, you’ll discover what to look for and what to avoid when choosing an insurance professional to help you protect your assets. This guide is about clarity and empowerment, to provide you a clear concept of what to ask an agent or what to consider to ensure your properly insured.

You need a valuable resource for helping you clear away the fear and confusion related to insurance, I am here for you. When it comes to protecting you and your association, whether it’s your coverage needs, questions, reviews, quotes, or even your personal insurance needs, I am here for you.

And if you have any questions about insurance, you’re invited to call me. I am dedicated in my commitment to thoroughly educating my clients and to providing you with exceptional service. Since this, or any, guide does not replace the need for working directly with a professional agent during your due diligence, I have set aside time to help you personally. Call today to claim your personal review appointment (847) 385-8063.

!! Sincerely, ! Ron Sirotzki Condo Risk Specialist

! “According to the Bureau of Labor Statistics, Insurance Sales Agents are part of a growing industry that will add jobs between 2008 and 2018.”

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GETTING STARTED

Finding an insurance professional that’s looking out for you first can feel like a needle in a haystack. But you don’t have to necessarily focus on a quality insurance agent right away. You can do a little bit of the legwork upfront.

Consider this: let’s say you are looking for some condo insurance because you recently became a member of the board. What could you do? Well, you could give a call to an insurance agent you’ve worked with before and simply ask him what he thinks would be a good piece of insurance for you. But is that really the best way to go about it? What else could you do?

You could start with your own research and find some insurance quotes yourself. Many insurance agents work directly for a large insurance company, so it’s important that you be willing to make these insurance agents compete with one another. Find the lowest quotes and then begin calling insurance agents in your area - and once you are able to get them to compete with each other, you’ll find out that insurance agents can sometimes bend over backwards to make sure that you get a deal that makes you want to opt for their insurance.

Of course, this requires that you be able to spot a good insurance deal yourself. Depending on the type of insurance you’re getting, there are a number of variables that will represent a good type of insurance bargain. For example, price is not the only bargain out there. When you consider other variables, such as an insurance deductible, then you realize that no two policies are created equal.

Spotting a good deal means continually searching for lower prices and better coverage - and taking note of what you find along the way. Don’t be afraid to overheat your Google engine. Try out some things that you usually wouldn’t try out. You may end up surprising yourself. If this is the strategy you decide to take, it’d be a good idea to make sure that you write everything down to keep track of what you find.

What’s interesting is that by spotting the good deals, you’ll be able to tell which insurance agents are the better quality agents. For example, if one insurance agent is unwilling to match a price and seems a little stubborn, then you have a good idea of what working with that agent might be like. But if you are able to find an insurance agent who is flexible and recognizes the good deals you’ve been able to find, then you’ll know that they’re probably a more appropriate insurance agent for you.

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AGENT OR BROKER?

Developing a long term relationship with an insurance professional is a key step in the development of a condo association’s insurance plan. Listed below is and explanation of the differences between insurance agents and insurance brokers.

INSURANCE AGENTS

Insurance agents are professionals that serve as an intermediary between the insurance company and the insured. As a broad statement of law, an agent’s liability to their customers is administrative. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork. Agents have no duty to conduct a thorough examination of your business or to make sure you have appropriate coverage. Rather, it is your obligation to make sure you have purchased needed coverage.

Insurance agents can be either:

Captive – A captive agent is an agent who works for only one company and is a “captive” of that company. A captive agent will sell policies only for that insurer.

Independent – An independent agent is one who works as an agent for a variety of different insurers. An independent can produce policies from several insurers and offer some comparisons of different insurance policies.

INSURANCE BROKERS

Insurance brokers can be best described as a kind of super-independent agent. Brokers can offer a whole host of insurance products for you to consider. Brokers are required to have a broker’s license which typically means the broker will have more education or experience than an agent.

Brokers also have a higher duty, in most states, to their clients. Brokers have the duty to analyze a business and secure correct and adequate coverage for the business. This is considerably more than the administrative duty of the agent. However, this expertise comes at a price. Brokers typically charge an administrative fee or higher premiums.

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WHAT MAKES A GOOD INSURANCE PROFESSIONAL

Being an insurance salesperson doesn’t always have a great connotation. It can be like a career in law: even though you might have a noble profession, you can find yourself to be the butt of a lot of jokes. But an insurance salesperson doesn’t have to resemble a used car salesperson: many are looking out for their customers and use their people skills to find deals that benefit both parties. This is what you want to find.

If you want to find it, of course, you’ll have to know how to recognize it. So here are a few tips for finding an insurance agent that is actually looking out for you.

The aforementioned “good deal” test. Come to your insurance professional well-prepared and ask them what they can do for you considering the deals you were able to find on your own. A good, creative professional looks at this as a challenge rather than an insult and will be willing to work with you to find something from their insurance providers that works best for you. You’d be surprised how many insurance agents will actually pass this test - after all, insurance salesmen are looking to make a sale. It doesn’t really matter to them what kind of insurance you get as long as you make a purchase. Some insurance salesperson might be a little pushier and try to get you to commit to more than you wanted, but don’t be surprised to see that many insurance salesmen know that a small sale is better than no sale at all.

Word-of-mouth reviews. Google reviews are too up-and-down to take too seriously; instead, worry about the word-of-mouth reviews that you can find from people you know. Ask around the community you live in. Ask people you know and trust. Find the best insurance professional through the best marketing method known out there: word-of-mouth! Try to get a review or two rather than simply rely on one person’s views - then act upon what you keep hearing from other people. If you find a really good insurance professional with this method, you’ll find that it’s almost impossible for them not to deliver the goods.

Find quotes first. Sometimes, an insurance salesperson won’t exactly wow you, but they’ll be the ones to make you signup to an insurance policy as smooth as possible. When you find the good quotes first, this is all you really need from an insurance agent. That’s the kind of forward-thinking you’ll want in your quest to find the right policy for you, but remember: an insurance agent still can help you out. Don’t assume that you’ll have to get with their program before you sign anything. Make sure they get with your program. Tell them what you need and what it would take for you to consider leaving another quote behind and signing up with them.

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Pay attention to how they interact with you. When an insurance professional seems too eager to sign you up without asking the types of questions that would need to be answered to find your ideal policy, then you know that this professional is in too big of a hurry to make the sale. This isn’t necessarily the worst thing in the world, and many good insurance professionals can make this mistake, but you’ll have to be the one to correct it. Don’t let anyone talk you into a policy simply because they act like they expect you to sign. A good professional will be able to close the deal without being pushy; they’ll be action-oriented while taking your individual considerations to heart. Pay close attention to how the professional you’re working with deals with you on your first visit, and you’ll have an idea of how they’ll treat you down the line, later.

!Obviously that’s a lot of information to absorb. But if you remember the key points about being able to find a good insurance professional you should have no problem sticking to a few of the strategies listed above. Remember that action is just as important as knowledge: unless you act on these tips, you can’t really be sure they’ll work or not!

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YOU SHOULD BE IN THE DRIVERS SEAT

An interaction with an insurance sales agent can be a tricky thing. Many people come across insurance in a variety of ways. You might contact an old agent you know in your community or you might come in contact with a complete unknown commodity via the Internet. How to act in these situations can make a big difference in the coverage you get and the price you pay in the end.

One thing that’s sometimes difficult to wrap your head around is actually pretty simple… should you be in the driver’s seat? Many insurance professionals will try to be in the driver’s seat because they’d like to steer you in the direction of placing an order, of course.

There’s no one right or wrong answer because it will depend on the professional that you talk to and the kind of situation you’re in. If an agent is too pushy with a policy, take control of the steering wheel. You can be polite, but be firm: “This isn’t really what I’m looking for. Do you have anything with a lower deductible?”

These types of sentences and questions can really turn the interaction around and get an agent to realize that they’ve been approaching you the wrong way.

Of course, in other situations, being a little more passive is a more appropriate action to take. If you have a really good insurance agent who knows just what questions to ask and really seems to have a good grasp of what you’re looking for, then you can let them be in the driver’s seat because they seem to know what they’re doing and they won’t push for the sale until you’re comfortable. Do your best to gauge the individual agent and react to their pitch appropriately.

There is, of course, another option. You can be proactive from the beginning! If you’ve done a lot of research and really know what constitutes a good deal on an insurance policy, then you can come to that insurance agent and ask them point-blank whether they have any similar policies that could beat the deal you’ve found. In this situation, you’re in complete control and it’s best to resist their attempts to take control of the sale. Let them cater their services to you in this situation and remain poised.

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WHAT CAN INSURANCE AGENTS HELP ME WITH?

Many people think of insurance agents almost like bank tellers - people there simply to handle your transaction and do nothing else. But an insurance agent with some creativity and a healthy appreciation for the value of their own work will be able to do a lot for you.

Consider the different areas insurance agents generally help you with:

Handling paperwork. This alone can be worth the price of admission - many times, insurance agents only require that you give them an in-person visit so that you can sign the papers they’ve prepared for you. This paperwork handling is a great way to get your insurance handled in a quick way - after you’ve done all your research, the actual signing of the agreements can be one of the errands you run in the afternoon.

Finding better policies. Insurance agents need to know their own insurance policies like the back of their hands - this enables them to consider the different types of solutions that would work best for you. If you came in with a specific policy in mind but talk to a good insurance agent, they might be able to recommend something that strikes your fancy even more.

Extending coverage. Insurance agents aren’t only about getting you to sign up - they are there to help when you’re a customer, too. Many people will simply sign their insurance and be done with it, but be sure to ask your insurance agent if they have any resources about how to handle sudden unexpected problems that your insurance will be covering. You’d be surprised what the agents can come up with.

!How do you choose a good insurance agent? At many levels, it can be a gut decision. But when you know your way around an insurance policy, you can upgrade your hunches to educated guesses. In an uncertain world, that’s often the best we can hope for, until you establish a relationship with a professional agent who has your best interests at heart!

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TOP 7 MYTHS

Workers’ Compensation coverage is for associations with employees. Policies with the same name have the same coverage, right? Is having vendor proof of insurance is all I need to protect my association? Learn why these insurance myths are inaccurate and find out answers to the top 7 condo insurance myths you should know.

!Myth #1: Insurance should cover you from every potential disaster.

Insurance is designed to protect you from catastrophic disasters. An insurance rule of thumb: If you can pay for the loss or damage without a financial hardship then prepare to pay for it, otherwise expect your insurance premium to eventually show an increase. Buying every type of insurance probably isn't necessary. Sometimes the risk is worth taking rather than paying expensive premiums, possibly forever.

!Myth #2: Since we don’t have any employees, we do no not need Workers’ Compensation Insurance.

As a member of a community association that has no employees you may not believe you should or need to purchase a Workers Compensation policy. This would make sense to anyone on the surface. Yet, we must remember that we live in a highly litigious society, where so many people are too quick to be lawsuit happy.

What would you do if the person you loved worked for a company as a service provider to associations and while on the job was terribly injured. As a result of this injury this loved one can no longer work, whats worse yet is the employer’s policy wasn’t large enough to cover all the medical costs, now what? You would ask your attorney to find the funds and she would be able to sue the association where your loved one was injured. Even though that association never had hired any employees, you’ll find the courts have proven to support the worker and will often award settlement to the worker.

So which one of your associations policies are going to pay for this? The only one you didn’t think you needed because your association doesn’t have any employees, Workers’ Compensation. It’s for this very reason that I recommend that every association has at least whats called an “if any” basis policy, this allows for a backstop protecting you and your association and saves you on the larger expense of common Workers Compensation policies.

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Myth #3: All Directors & Officers Liability Policies are the same.

Shakespeare famously asked us what’s in a name, leaving us to believe that since all roses smell as sweet, the name is meaningless. In this case this is totally false. That’s like saying that everybody named Tom, Emily or Arthur will have the same likes, tastes and preferences. Ridiculous, I know, yet when claims are denied due to lack of coverage you learn very quickly that not all polices are the same.

!Myth #4: Your property manager knows what insurance your association needs.

Your property manager maybe awesome handling all the issues that come up and does well to maintain the quality of your association. However, most property managers are not licensed insurance professionals, they are licensed property management professionals who rely on other professionals for guidance.

If you find a property manager handling your insurance needs without ever meeting a licensed agent you could be facing an issue of the sweetheart deal. Or you may find that your property manager is stepping out of their specialized knowledge area and into an area that could get you and them in trouble. Its best to meet with your association’s agent for a personal review, be weary of any agent who is unwilling to attend a board meeting to explain or review your coverages and needs.

!Myth #5: Replacement cost coverage means everything will be replaced.

If only insurance was so easy, this is just not true. Your insurance policy is essentially a promise to return things to they way things were before the loss which is great. But what happens when the cost to replace exceeds the value your association was insured for? Well quite simply you get caught in something called co-insurance and that can happen even when you have a replacement cost based policy.

!Myth #6: When the neighbor upstairs has overfilled the bathtub and caused water damage to the unit below, they are responsible to file the claim with their insurance.

Only if common sense ruled the day. As it turns out there are specific legal documents that govern how an insurance situation like this can be handled. Since the association’s

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insurance is primary, it must cover the damage. However as you will later see there are options on what you can do as a board member to restore “common sense.”

!Myth#7: Since your vendor/service provider gave you a Certificate of Insurance, your association is off the hook.

This too is incorrect. Unfortunately certificates of insurance are not guarantees of polices being in force or of including the types of coverages needed. What!? At the time a certificate is released the policy would be in force, sometimes vendors fail to pay premiums allowing policies to lapse. This gap in coverage exposes your association if you received a certificate earlier in the year.

And in all cases you will want to make sure to have your association added on the certificate of insurance as an “Additional Insured” but to then follow up with the insurance carrier, not the agent, just to confirm that the policy is in force.

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WHAT TYPES OF INSURANCE DOES THE ASSOCIATION NEED?

!Obviously we must consider your needs and the needs of the association but did you know that there are specific legal documents that must be considered also? One of the documents you should be familiar with, the Association’s Declarations & Bylaws. The other is called the Illinois Condominium Property Act and was put in place to protect the common interests of you and all those who live within the association. As a member of the board you have a special obligation to be familiar with this act.

Included here is a great outline for you to use as you establish your associations insurance needs. In 30 years of issuing insurance policies I have never issued two of the same, meaning there is no way to create a one size fits all guiding document, so please exercise your prudence by performing your due diligence with your insurance professional. This guide is about clarity and empowerment, you should have a clear concept of what to ask your agent to ensure your properly insured.

PROPERTY

• Coverage for the buildings and units: The Act limits the association’s responsibility for coverage up to the bare walls and include the prime coat finish, bare floors, and bare ceilings to a prime coat finish of the units.

NOTE: Walls, Ceilings (finished paint coat) and Floor coverings (carpet, tile, wood, or other) are not required to be covered as part of the Association’s insurance policy. ***Warning to you as a condo unit owner: This is one area where your personal coverage needs to reach out to where the Association’s coverage leaves off***

• Coverage for Common Elements: Though we can generalize as to anything a community shares as a common element the Condo Act defines specifically what is considered a common element. These elements include; fixtures located within the unfinished interior surfaces of the perimeter walls, floors, and ceilings of the individual units initially installed by the developer.

• Limited Common Elements: No these aren’t scarce resources that your neighbors picked up and hid from you, its generally considered to be structurally part of building and shared by two or more units. Such as a piece of plumbing that feeds water to or removes waste from multiple units.

• Replacement Cost: You purchased insurance to make sure that if the worst happens its covered, you’ll also want to be sure that the limit for your building coverage meets your expectations. You should be covered for the full (100%) replacement cost of the property. That means to put it back exactly the way it was before it all happened

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***Word of Caution - This does not include any legal changes your town, city, county, state or other governmental agency deems necessary. To comply with current building codes you’ll need to look into Ordinance or Law coverage (see below)***

Types of Replacement Cost You Might Find

• 100% Replacement Cost: Seems a little misleading so be careful as you are only covered to 100% of the stated “agreed amount”. This “agreed amount” can be found on the property coverage declarations page, which is essentially a quick outline of the coverage in the policy. Usually within the first few pages of your policy. Make sure the amount stated is the amount needed as the stated amount is the maximum that can be claimed.

• Extended Replacement Cost: This sounds interesting and it would seem that it provides coverage in excess of the 100% replacement cost values and it does. Yet you still need to heed caution as the stated amount is the base number that the extension is added to. Usually provided at 20% to 25% higher than the 100% stated value.

• Guaranteed Replacement Cost: Just what it sounds like. This form of coverage will replace the property regardless of the actual value stated (in this case the stated amount is usually for rating purposes). When you have the option to purchase Guaranteed Replacement Cost type coverage don’t rush in too quick although this is a powerful feature there are many other considerations as you’ll see as we go.

POLICY FORM

What type of policy should I purchase for the association? Policies are written in what’s called a form this allows for better standardization and regulatory compliance within the industry. The only type of policy you should consider is:

• Special Form (All Risk) Policy: Essentially each form as its own coverages or exclusions, knowing this be sure to request a policy form that will include coverages that other policies exclude. Such as water and sewer backup through a drain and Ordinance and Law.

WHAT IS ORDINANCE OR LAW?

Remember earlier when I warned you about potential government agencies changing regulations within building codes? This is where Ordinance or Law coverage comes into play. This coverage is supplied in three parts; Coverages A, B and C. To understand how these coverages work together let’s use an example like when a major calamity strikes such as a large fire. Since Fire departments respond quickly usually the entire building is not lost. This leaves a remaining portion of the building standing.

COVERAGE A: Loss to the Undamaged Portion of the Building.

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In the event that the fire mentioned in our example above the building, now uninhabitable, is ruled by a regulatory agency as needing to be torn down. Since insurance normally doesn’t cover what isn’t lost, special coverage is included for the intentional tear down of the remaining portion. This now leaves you with a bill for the demolition crew and clean up which is why the insurers offer...

COVERAGE B: Demolition Cost

Knowing that you’d be left with a very large “clean up” bill the insurers have offer Coverage B to pick up that tab. Demolition of the undamaged portion is a separate cost then what it would be to repair or rebuild the building. In order to ensure that you’re insured there are both Coverages A & B, what about C?

COVERAGE C: Increased Cost of Construction

Back to our pals at the regulatory agencies, they often find that we need to change what we use or include to make our buildings safer places to live. As time and technology move on new discoveries are made as to what is the “best” way to build a safe building. When adopted into law most people will not need to be concerned. However, when a fire like our example above, occurs and the entire building must be rebuilt your builders will need to follow the law. This could mean adding sprinklers, an elevator or even “green” compliant windows or climate control systems. Any items that were not originally part of the building would otherwise not be covered without Coverage C.

***Caution this limit is often left at default or very low. This coverage is generally not terribly expensive and can literally save you millions if you ever need to use it When working with a contractor recently he explained that $10,000 per unit is a rough cost of just sprinkler installation. This means a 100 unit association would need a million dollars in coverage for that alone. ***

WHAT ARE THE DIFFERENCES BETWEEN WATER DAMAGE, SEWER BACKUP, AND FLOOD?

Water is water right? Not when it comes to insurance. Insurance covers your stuff against certain “acts” so depending on where the “water” comes from it may or may not be covered unless you request the coverage.

Water damage: This type of damage occurs most commonly due to pipe breaks, rain or melting ice, and even includes water damage from a fire sprinkler system discharge or the water damage caused from the fire department extinguishing a fire.

Back up through a sewer or drain: Most policies exclude this coverage though it can be added back into a policy with endorsement or by using the Special or All Risk Form we discussed earlier. If water or sewage backs up from a drain then the loss is not going to be viewed in the same way as water damage discussed above. The primary reason for this is because these types of losses usually occur due to factors that are beyond your control. A

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thirsty root systems from nearby plants with the power of mother nature and can find their ways into your drain system, restricting water flow and during heavy use could cause water to back up through the sewer drain.

Flood: No matter how high the water gets in your basement, even if four feet high, if the water is due to a pipe break its NOT a flood. A flood is a very specific term defined by the National Flood Insurance Program (NFIP), in simplest terms, as an unusual, rapid accumulation of water (or mudflow) on land that is normally dry and must cover either 2 acres or effect 2 or more properties.

Flood is a standard exclusion in a property policy though even the properties not located in a “flood zone” should consider having this coverage as mother nature can be unpredictable and once it happens it’s too late.

UNIT OWNER VERSUS ASSOCIATION COVERAGE

As we saw earlier the association is responsible for certain coverages though leaves off at particular points. As an owner of a unit you will want to make sure that your policy picks up where the association leaves off. The Condo Act as well as the Association's Declarations & Bylaws are a great place to start, as the Board of Directors may have elected to cover more than what is legally required. This would be good to know before you double insure your condo and pay for coverage you could never use.

This is what the association typically covers:

• The Building structure from the foundation up;• The units up to the unfinished surface of the drywall (most carriers will prime it). • Permanent fixtures and built in appliances. This includes, developer installed; cabinets and bathroom fixtures, HVAC equipment, plumbing and electrical systems.• Limited Common Elements; Windows and doors (exterior and interior) and would include balconies or decks attached to the structure. (Unless the associations operating agreement states otherwise).

This usually leaves for you as a condo owner:

• Wall coverings decorative finishing on the walls and ceiling • Floor coverings carpet, tile, or wood.• Any upgrade to the unit of fixtures or limited common elements • Personal Property in the unit and stored elsewhere on the Association’s common elements (regardless of the circumstance or origin of loss).

Betterments and Improvements

So you bought this beautiful condo in the perfect neighborhood and wanted to upgrade your kitchen to meet your standards. Certainly you find it better now that you improved it,

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this would be a “betterment or improvement”. These items are usually covered by the association only when original, which means you will need to make sure that your personal policy covers the upgrades. What if they were original to you when you moved in but not to the association when built? Good question, glad you asked! Not covered by the association but can be added to your personal policy.

The Act defines Betterments and Improvements as all “decorating, fixtures, and furnishings installed or added to and located within the boundaries of the unit, including electrical fixtures, appliances, air conditioning and heating equipment, water heaters, or built in cabinets installed by the unit owner.”

THE ASSOCIATION’S DEDUCTIBLE: As a member of the Board of Directors you may be faced with an insurance claim. Nearly every policy has a deductible which is the portion of the loss that is “out of pocket” to the association. The deductible you decide upon should be something that wouldn’t put the association in financial hardship though there are options for how you handle recovering/funding the deductible. You have three options: 1. As a common expense: simply paid out of the operating or reserve account

2. Assessed against the owner(s) who caused the damage or from where the loss originated.

3. Require the unit owner(s) of the units affected to pay a prorated or shared portion of the deductible.

Before you decide to use options 2 or 3 consult with your attorney as improper use of these could result in a lawsuit. Though don’t shy away from these either as the association's budget may not be in the situation to “absorb” the loss and may otherwise need to.

If your worried about your community members being able to cover the cost, don’t be. Your agent should have advised you to inform your community of what a unit owner should have to pick up where the association leaves off. This includes the deductible as a special assessment which is coverage that can be added to most personal policies for a few dollars.

GENERAL LIABILITY

Whether your association is at fault or not you may find yourself brought into a lawsuit for something that your association is otherwise considered potentially liable for. The courts will ultimately decide where fault lays though cost of an attorney alone is worth the value of the policy. In the event that your association is found liable this is the coverage that would pay out.

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General Liability provides coverage for the legal costs, compensatory and general damages arising from suits against the association for personal or bodily injury, property damage to others, and advertising injury.

I recommend the following coverage as basis:• Minimum of $1,000,000• Include as insured, the association, the board and managing agent • Include Unit owners as additional insureds

There are 6 typical elements of a General Liability Coverage

I. Each Occurrence Limit: $1,000,000 2. Personal and Advertising Injury Limit: $1,000,000 3. General Aggregate Limit: $2,000,000 4. Products and Completed Operations Limit: $1,000,000 5. Legal Liability Property Damage: $ 100,000 6. Medical Expense Limit: $ 5,000

Element 1: Each Occurrence limit sets a maximum amount the carrier will pay for any one claim. Any amount owed to a claimant beyond the covered limit will need to be picked up by an umbrella policy, if you have one in place.

Element 2: Personal and Advertising Injury limits will pay for any claim arising out of personal injury; such as libel, slander, false arrest, discrimination, and invasion of privacy. And advertising injury; claims made for the same elements of of personal injury, but were committed via the media of advertising. This is not physical harm coverage.

Element 3: The General Aggregate is the maximum amount a carrier will pay during the policy period for all claims incurred. So if you have a $1,000,000 occurrence limit with a $2,000,000 aggregate you can sustain TWO $1,000,000 claims within the policy period.

Element 4: Products and Completed Operations usually not applicable for the community associations. As it provides coverage for Liability arising out of defective products or completed work.

Element 5: Legal Liability also known as Rented Premises is coverage for damage caused by the insured to a third party’s property. So if you hold your board meetings in a library or other rented facility and happen to bring a coffee pot which somehow fails and starts a fire, this is the coverage that pays for the damage as a result.

Element 6: Medical Expense is coverage to provide medical expense compensation for person’s injured on the insured’s premises. It keeps your friends, your friends as they do not need to file a legal claim against you or the association for this to payout. Often times by responding quickly to an injured party with this coverage they are not as inclined to sue for significantly larger amounts, causing your insurance costs to rise.

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!DIRECTORS AND OFFICERS COVERAGE:!As a member of the Board of Directors you are faced with many decisions which will carry an impact in someones life. If that someone deems what you’ve done to be unfair, a lawsuit will be filed. Decisions reached by you and the board are not covered under any element of General Liability which is why you need a Director’s and Officers policy to cover legal fees as well as any claims awarded.

Not all Directors & Officers liability polices are created equal. Cost aside, coverage can be and often is quite different from one insurance company to the next. I recommend you consider the following guidelines as a starting point in your quest for quotes.

• A minimum limit of $1 ,000,000.

• Make sure the policy covers all contracts and actions taken by the board of directors

• Provide indemnity to volunteer board members for their work on the board.

• Seek a policy that includes; discrimination, employment practices liability, coverage for property managers, breach of contract, failure to maintain or obtain insurance or legal fees for demands seeking non-monetary relief.

!COVERING THE ASSOCIATION’S MONEY!Protecting your association means protecting your association’s money too. No one expects to vote a money laundering swindler onto the board or into office for that matter. Yet, we both know this occurs and those who don’t have the default built in limit adjusted to fit the needs of the association get hit hard, that money is gone forever, never to be recovered. Coverage for criminal acts and acts of dishonesty are a sad necessity.

To protect your association make sure you have at least a limit equal to your operating account + reserve account + three months assessments. This rule of thumb will help get you pretty close to exactly what you need.

You may come across three types of policies; Fidelity Bond, Employee Dishonesty & Crime. These policies do NOT provide coverage for accounting mistakes or loss of money due to poor work performance. It does NOT cover for losses due to the normal operations, or interruption of operations of the organization. What does do?

Fidelity Bond covers dishonest acts of employees and will provide coverage to an organization for financial loss of money, securities, and other property due to fraudulent activities of one or more employees. And is a stand alone or additional policy.

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Employee Dishonesty is generally included in standard package property policy and it deals with loss of money and securities from dishonest acts of employees

Crime is the broadest form of this class of coverage as it covers dishonest acts and extends to include coverage for theft, depositors forgery, loss of money orders, and losses arising out of counterfeit paper currency.

***Word of Caution some policies exclude the property manager. Be sure to request a policy that extends to cover your property manager. ***

UMBRELLA COVERAGE EVEN WHEN ITS NOT RAINING

Umbrella coverage, sometimes called Excess Liability provides EXTRA coverage over your general liability or other underlying coverages. As we discussed before the general liability limit has 6 elements and when one of those elements are exceeded the umbrella will step up to pick up the rest. These limits essentially are added to one another to provide limits more suitable to your needs. An Umbrella Policy of $2,000,000 is a great starting point which demonstrates prudence to the courts.

A good umbrella policy will extend over...

• General Liability • Hired and Non Owned Auto Liability • Directors and Officers Liability• Employers Liability (Work Comp)• And if applicable: Employment Practices Liability.

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INSURANCE GLOSSARY

Need to learn more about an insurance term? Find an easily accessible list of insurance terms with definitions here!

ABSOLUTE AND STRICT LIABILITY

Being absolutely liable regardless of who is at fault is considered absolute liability or strict liability. Taking steps to reduce one's exposure to absolute liability is important to the insurance company.

ACTUAL LOSS

Actual loss, or sometimes known as actual loss sustained, is the actual value of your loss that is covered by your insurance.

CO-INSURANCE

Co-insurance is the percentage amount that one is required to pay. Usually used with health insurance plans, co-insurance is a way for the insurance company to share the costs with the policy holder and to keep premium costs down.

HOMEOWNERS INSURANCE PERIL

Get to know more about what a peril is and what types of perils your homeowner’s insurance covers. Having a good understanding of your insurance perils is important in making sure you have adequate insurance coverage.

INSURANCE DECLARATION PAGE

Most insurance policies have multiple pages. Filing through these pages to understand the basics of an insurance policy would be complicated. The insurance declaration page simplifies this process by giving the insurance policy holder a basic overview of their insurance policy.

INSURANCE ENDORSEMENT

Insurance endorsements are important additions to an insurance policy. It is important to understand how the insurance endorsement can change the policy.

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UNINSURED/UNDER-INSURED MOTORISTS COVERAGE

If you get into an accident and the other driver was liable (it was there fault) and for various reasons the other driver (or their insurance) could not pay for your damages, your uninsured motorists coverage would step in to protect you.

VENDOR INSURANCE

Vendor insurance is a specialty insurance policy for those who sell goods at events such as fairs and trade shows. Vendor insurance can include vendor liability insurance along with product insurance.

VICARIOUS LIABILITY

In insurance, when you are negligent you may be liable for the result of your negligence. To be negligent means that you failed to act or you did not act as a reasonable person would in the same situation. Vicarious liability is a form of strict, secondary liability that covers the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability or duty to control" the activities of a violator.

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ADDITIONAL RESOURCES !!Included here are some additional resources to help you remain control of the process.

!COVERAGE COMPARISON TOOL: This handy tool helps lay out the final three for quick comparison of coverage. I use this tool to help illustrate comparative value between various policies. You can use this tool as the final step in your decision making process, after all other considerations for coverages and limits have been made.

COVERAGE REVIEW & COMPLIANCE TOOL: When obtaining quotes from multiple agents you will want to be sure that the quotes provided meet your needs and comply with legal governing documents. With this tool just hand it to your agent and request it to be filled out and signed.

PROFESSIONAL COVERAGE REVIEW SERVICE: This FREE service of live personalized attention is offered exclusively to help you make the best insurance decision for your association. See page 27 for more details.

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ASSOCIATION INSURANCE COVERAGE COMPARISON For the community of:_____________________________________________________

Current policy Expiration:_________________ COMPANIES

COVERAGEProperty

Building Property $ $ $Deductible $ $ $

Ordinance (A) Undamaged Portion $ $ $or (B) Demolition $ $ $

Law (C) Increase Cost Const $ $ $

General LiabilityAggregate $ $ $Per Occurrence $ $ $Deductible $ $ $Hired/Non-Owned Auto $ $ $Fire Legal Liability $ $ $Medical $ $ $

Fidelity Bond or Crime $ $ $Deductible $ $ $

Directors & Officers $ $ $Deductible $ $ $

Umbrella $ $ $Retention $ $ $

Commercial AutoBodily Injury $ $ $Property Damage $ $ $Medical $ $ $Comprehensive $ $ $Collision $ $ $Underinsured $ $ $Uninsured $ $ $Hired/Non-Owned Auto $ $ $

Workers Compensation $ $ $

Total PremiumMulti - Peril $ $ $Fidelity $ $ $Directors & Officers $ $ $Umbrella $ $ $Commercial Auto $ $ $Work Comp $ $ $

Total $ $ $This is an outline of common coverages and costs only, for additional information or details refer to individual policies or quotes.

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COVERAGE REVIEW & COMPLIANCE

All Insurance bids must be accompanied with this form filled out in its entirety and signed by submitting agent/broker. The purpose of this form is to ensure the coverage meets or exceeds

the Illinois Condominium Property Act as well as The Association’s Declarations & Bylaws

PROPERTY/ASSOCIATION NAME: Address

Property Manager

Property CoverageInsurance Company & RatingEffective Date

Building Limit Policy DeductibleWith Replacement Cost Yes NoWith Extended Replacement Cost Yes NoGuarantee Replacement Cost Yes NoAgreed Amount End. Yes NoBlanket Building Limit Yes NoIce Damning Deductible Per Unit Yes No

Contents/Business Personal PropertyPolicy Deductible

Business Income

Building Ordinance & Law:Coverage A - Loss to Undamaged PortionCoverage B - DemolitionCoverage C - Increased Cost of Const.

Flood LimitFlood DeductibleEarthquake Yes NoEarthquake DeductibleSewer Backup LimitWind Driven Rain Yes NoLeakage and Seepage Yes NoMold Coverage

Terrorism - Certified (Foreign Acts)

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Terrorism - Non-Certified (Domestic Acts)

Annual Premium

Boiler & Machinery/Equipment Breakdown:Insurance Company & Rating

Property Damage Limit Policy Deductible

Annual Premium

COMMERCIAL LIABILITY: Insurance Company & RatingEffective Date

OccurrenceAggregateFire Legal LiabilityMedical ExpenseProperty Manager Included Yes NoHired & Non-Owned Liability Yes No

Annual Premium

CRIME: Insurance Company RatingEffective Date

Blanket Employee Dishonesty LimitPolicy DeductibleProperty Manager Included Yes NoVolunteers & Committee Included Yes No

Annual Premium

UMBRELLA LIABILITY: Insurance Company RatingEffective DateEach OccurrenceAggregate Limit Excess of D&O and WC Yes NoAnnual Premium

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!

DIRECTORS & OFFICERS LIABILITYInsurance Company RatingEffective DatePolicy Limit Policy DeductibleClaims Made Yes NoProperty Mgr Included Yes NoBreach of Contract Yes NoNon Monetary Included Yes NoInsurance Exclusion Deleted Yes NoCommittee Members Included Yes NoEPLI Yes NoAnnual Premium

WORKERS' COMPENSATIONInsurance Company RatingEffective Date

BI by Accident - Each AccidentBI by Disease - Policy Limit BI by Disease - Each EmployeeBoard of Directors Covered Yes No

Annual Premium

TOTAL ANNUAL PREMIUM (ALL LINES)

AGENT/BROKER INFORMATIONAgent/Broker NameAgency NamePhone NumberFax NumberEmail Address

By signing this document you, the agent/broker acknowledge that the insurance quote or coverage offered meets or exceeds the Illinois Condominium Property Act (765 ILCA 605) as well

as The Association’s Declaration & Bylaws and that the information contained on this page is true and accurate.

Signature ______________________________________________ Date ________________

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FREE PROFESSIONAL REVIEW SERVICE !As part of my ongoing commitment to serving the needs of my current & future clients, I specifically allocate time each month to performing personalized review services. This FREE service and my personal attention is offered exclusively to help you;

• Determine Your True Coverage Needs & Never Again Pay For Unnecessary Coverage

• Expose Gaps In Coverage To Cover What Always Should Have Been

• Compare Multiple Quotes With An Easy & Proven Process

• Discover Best Value For Your Situation

!Time is a limited resource, call today to reserve your place on my schedule for your personal review at (847) 385-8063.

!!!!!!!! Ron Sirotzki Condo Risk Specialist

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Condo Ins Guide IL

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