--------------------------------
                                                         OMB APPROVAL
                                                --------------------------------
                                                OMB Number:       3235-0060
                                                Expires:          March 31, 2006
                                                Estimated average burden
                                                hours per response          2.64
                                                --------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
     Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 29, 2004

Commission file number 0-17691

                   Krupp Insured Plus-III Limited Partnership
             (Exact name of registrant as specified in its charter)

         Massachusetts                                     04-3007489
(State or other jurisdiction of                (IRS employer identification no.)
incorporation or organization)

One Beacon Street, Boston, Massachusetts                      02108
(Address of principal executive offices)                    (Zip Code)

                                 (617) 523-0066
              (Registrant's telephone number, including area code)

                                       N/A
          (Former name or former address, if changed since last report)

SEC 873 (6-04)    Potential persons who are to respond to the collection of
                  information contained in this form are not required to respond
                  unless the form displays a currently valid OMB control number.


                                      -1-


Item 8.01. Other Events

      Terminating Capital Transaction Distribution

      The Partnership completed the process of winding up its business during
      the third quarter of 2004. Upon the occurrence of a Terminating Capital
      Transaction, as defined in the Partnership Agreement, the Partnership
      Agreement provides that losses from such a transaction, which were
      approximately $200,000, were to be allocated first to the Limited Partners
      and General Partners to the extent of any then existing positive account
      balances (or, if the amount would be insufficient to reduce those positive
      capital account balances to zero, then in proportion to any positive
      account balances). As of December 31, 2003, the General Partners had
      deficit account balances of approximately $408,000 and the Limited
      Partners had positive account balances of approximately $16,669,000.
      Therefore, all estimated losses from the Terminating Capital Transaction
      were allocated, for tax purposes, to the Limited Partners to reduce their
      positive capital accounts. Subsequent to this allocation, the General
      Partners had a remaining deficit balance in their capital accounts of
      $432,780, which included current year distributions. This amount was
      contributed to the Partnership by the General Partners on September 27,
      2004, was included with other amounts available for distribution from the
      Terminating Capital Transaction, and was distributed to the Limited
      Partners on September 29, 2004 in a final liquidating distribution of
      approximately $0.20 per Limited Partner interest.


                                      -2-


                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              Krupp Insured Plus-III Limited Partnership
                                             (Registrant)


                              BY:  /s/ Alan Reese
                                  ------------------------------------
                                  Alan Reese
                                  Treasurer and Chief Accounting Officer of
                                  Krupp Plus Corporation, a General Partner.

Date: September 29, 2004


                                      -3-