Umbrella Policy For Rental Units
Hi All,
I am considering an umbrella policy to protect my assets (currently three rentals and a primary) and I was looking through the policy and it states that that business liability is excluded. Does this mean that my rentals will not be covered if I am sued by a tenant?
I am a bit confused about this and would like some advice or opinions regarding the umbrella policy and its relevance to rental units. I plan to hold rentals in my business name (an LLC). Does this mean that I need seperate business insurance?
Thanks,
JS.
Just my opinion, but more than likely YES!!! Seperate business liabilty insurance is required. The umbrella policy covers fire, and hazards, damage, etc etc. For a fee your Insurance agent should be able to either amend or attach a rider to the policy covering your business. I am not currently licensed in Insurance but many years ago I was.
Thanks for the reply getitqwik. So if I hold title to the rentals in the business name, you think that the business policy is necessary? What if one holds title personally rather than in the business name but just uses the business to manage the properties. Is business insurance also required?
Input from other investors is also welcome and appreciated.
Thanks,
JS.
I want you to define Business insurance. What are you seeking to protect?
If you use the property as rental property your insurance for that property needs to be rental insurance , this is not homeowners. Homeowners insurance covers liability against the homeowner as well as all hazards basically to the property. If you want insurance to protect your rental homes it is a different policy and covers the property and USUALLy very little if any liability on you. You need a liability clause or rider.
If you are operating a business without liability insurance, one lawsuit can wipe you out, depending on asset ownership and type of business entity. You can have a blanket liability policy, as well as a blanket hazards protection policy aginst the rentals.
Let me give a scenario to see if I can make it clearer. My properties were all bought in my personal name. I have transferred some of them to my LLC via Quit Claim. However, my insurance is all in my name and the name of the mortgagor for each individual property.
Can a tenant come afetr the business with a frivolous lawsuit? If they do, is the LLC protected from liability? Is there any need to have liability coverage from the point of view of the business? Or is the personal liability umbrella enough protection?
Thanks.
JS.
smithj2
I am trying best I can for you to understand your insurance. When you buy insurance on your home it is homeowners. When you rent it out it needs to be changed thru the insurance company as reflecting rental property because the liability changed. That is what I am saying. If a claim arises you will find this out the hard way. Also the mortgages are in your name along with the insurance with security as the property. Changing name to equitable title the property by quit claim to your LLC does nothing to release your liabilty for claims file against you, nor does it do anything to stop your liability for the payments. That I am sure you know I just wanted it to be clear. LLC is not entirely a safe move. In many states they are really untested and for the regulations they have you need to follow them. Commingling is a serious problem. You need to see an Attorney and a CPA familiar with LLC. It is your business entity you want to make a lot of money and short changing legal advice can cost you dearly. Even SEASONED INVESTORS learn this lesson the hard way sometimes. Free advice is cheap to get and HELL to pay. See an Attorney. Just my opinion here.
fbprop
NOT off topic at all. This is EXACTLY one of the issues I was trying to get him to understand. I am too wordy. Thanks.