Majority of real estate investors have one or two properties and own their own home
A common mistake is to think that your home insurance liability extends to all of your rental properties
Your home insurance liability does extend to vacant land you own but not to rental property
Some home insurance companies will extend liability to rental properties but this is an endorsement that must be added and the company will charge you an additional premium
To protect yourself most real estate investors will buy a home in an LLC
Buying a home in an LLC is a good way to protect yourself personally from a claim but its not bulletproof
You can still personally be brought into a claim because the plaintiff attorney is going to name everyone they can in a lawsuit and see who pays
So what happens if you own a rental property in an LLC and you are named personally in a claim?
If you are the managing member of the LLC and the title of the property is in the same LLC, you personally will get a liability defense
If you own the home in your personal name, but you purchased insurance in an LLC, you have an issue
The LLC does not legally own the home.
Only the owner of the home must be listed on the declarations page of the rental property insurance
I’ve seen many mistakes made with owning rental property and buying rental property insurance
Often a property is owned in an LLC but the insurance is in the personal name
or the opposite….the property is owned in a personal name but the policy is written in an LLC
You must match the owner on the property title to the named insured listed on the policy
If you own the property in an LLC and you are the only managing member, you don’t have to add yourself personally to the policy as long as the policy provide liability in the LLC
Most rental property insurance policies will not offer liability in the name of an LLC
The Liability gameplan you need to protect yourself from a claim
It is ok to own rental property in your personal name as long as you buy a personal umbrella policy
You can list all your rental properties on the umbrella and you will get an additional 1,000,000 of liability to insulate yourself from any claims
What type of claims?
Slip, trip and fall from your tenant and their friends and family
Property damage claims
What do I need to do to get a personal umbrella policy?
Raise your car insurance liability limit to 250,000/500,000
Raise your home insurance liability limit to 300,0000
Raise your rental property liability limit to 300,000
Purchase a personal umbrella policy for as low as $1/day
If you own your rental property in an LLC you can’t qualify for a personal umbrella
If you are interested in protecting your real estate investments, FM Agency Group has created the Rental Advantage program that may interest you
click here to see how we can help you THE RENTAL ADVANTAGE