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

It doesn’t

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

Complicated?

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