Real Estate Insurance & Umbrella Policy

[Weis Sherdel]

I am a novice real estate investor, and very close on acquiring my first rental property in Indianapolis. The long term vision is to own 10 SFR.

My research here at BP tells me an LLC is not necessary, but then everyone talks about an insurance that can serve the same purpose. Can someone please clarify what this insurance protects, how do I get one, etc? Forgive the rudimentary nature of this questions, but the only insurance I know is the homeowner insurance.

[Raj S.]

I'm not an attorney and I'm only offering you my opinion. One of the biggest benefits to buying a property under an LLC is to limit your liability and protect your personal assets. If you're able to buy a property under an LLC and get financed through the LLC, I think thats always the best option. The problem is that getting financing through an LLC isn't always easy to accomplish.

The easier route is usually to get the financing personally and take title to the property under your own name.  This leaves you open to the risk of your personal assets being compromised in the event of a lawsuit.  To combat that risk its a good idea to make sure your homeowner's policy has a high amount of liability protection.  I usually take $1 million per event ($2 million aggregate).  You can then take an umbrella policy to further protect yourself above and beyond what your homeowner's policy covers you for.

The following post will probably be of help to you: http://www.biggerpockets.com/forums/51/topics/157675-indianapolis---how-can-i-change-the-title-from-my-name-to-my-llc-when-the-loan-is-in-my-name