Umbrella Insurance for rental property investors

A common question from most real estate investors is LLC vs Personal umbrella policy?

I suggest a personal umbrella policy over an LLC and here is why

 

Only an attorney and your CPA should answer all your questions about an LLC

I speak to real estate investors every day

Some have each property in an LLC and some have all their properties in their personal name

Owning all your properties in your personal name only makes financial sense if you purchase a personal umbrella

If not, your entire real estate portfolio is exposed to a claim


I like to define a claim as “something that can never happen in a million years only takes a second”


Best Umbrella Insurance for Landlords

If you own your properties in your personal name here is the liability gameplan you must follow

 

Step 1

max out the liability limits offered on your primary rental property insurance policy

Insurance companies will usually offer 300,000 or 500,000 max liability limit

The cost difference between the two options can be as low as $25 a year

Max out the limit available

 

Step 2

Purchase a personal umbrella policy or an excess liability policy and schedule all your properties

Some of these type of policies will limit the number of properties you can add to the policy and may limit the amount of coverage you can purchase

A max limit can be 5,000,000 or 10,000,000 and it depends on the insurance company

 

How much does a personal umbrella policy for landlords cost?

It can start as low as $300 a year

and the minimum limit you can buy is 1,000,000 of liability

How much liability will I have after I purchase the personal umbrella policy?

You need 300,000 of liability on your primary policy to qualify for the umbrella policy

If you purchase a 1,000,000 limit you will have 1,300,000 of liability to shield you from a claim

You can purchase higher limits up to 10,000,000

 

Why a personal umbrella over an LLC?

An LLC is a business and you must treat it as a business

You can not mingle your personal funds with the LLC funds otherwise you expose yourself personally to a claim

Did you “pierce the corporate veil“? would be a common conversation with your attorney after a claim 

Most attorneys in New Orleans will name you personally in any lawsuit to try to find deep pockets anywhere they can

You personally and your LLC would be named in the lawsuit

 

Tip:  a personal umbrella would exclude any coverage for business operations on behalf of your LLC

You would need to purchase a commercial umbrella policy and the underlying liability requirement is 1,000,000 

You would need to have your rental properties owned in an LLC on a commercial property form

 

The added benefit of having a personal umbrella policy?

Yes you can add your rental properties to your personal umbrella policy and get an additional 1,000,000 to start

but you also get liability protection for yourself

You get an additional 1,000,000 of liability over 

your home

you cars

your boat

your motorcycle

your condo

 

We all know the slip, trip and fall scenario that exposes real estate investors to lawsuits weekly in Louisiana but what about an accident you are responsible personally?


The most dangerous thing you do every day that exposes your bank account is when you get behind the wheel of a car


Inattentive driving accidents have skyrocketed over the years due to smartphones being connected to our hip 24/7

 

When you purchase a personal umbrella policy you must raise your liability limit on your car insurance to 250,000

This allows you to now have 1,250,000 of liability when the next accident occurs

 

There is no correct answer if you should own your properties in an LLC or in your personal name

Each option has pros and cons

As a real estate investor and an insurance advisor I prefer the personal umbrella for all my assets

I don’t want to have defend myself  and prove that I didn’t “pierce the corporate veil” on a rental property I own in an LLC with a plaintiff attorney

If there is a claim I turn it in to the insurance company on the property and I turn in the claim on my personal umbrella policy and let the insurance companies investigate and defend me

Bonus:  The personal umbrella policy not only covers my mistakes or accidents but my wife and kids too


The #1 goal of insurance is to protect you from a financially devastating event


The personal umbrella policy for Landlords and real estate investors is the one policy you must own

My name is Tim D’Angelo and if you want to discuss a personal umbrella proposal to protect your real estate portfolio

you can call me at 504.348.3131 or book an appointment with me at a time that is convenient for you

Talk to you soon