Umbrella Insurance with Friends?
I can't find anything about Umbrella Insurance among a group of investors.
Me and two others are looking to invest in a SFH property. We don't want to form a LLC due to the poor finance options out there. Per the posts I've read, Umbrella insurance is the way to go.
After talking to my agent, he said each person would need to get umbrella coverage because its tied to your personal assets. That would be around $400 per person or $1,200 total which would effect our Cash Flow analysis.
Is this the case? Are there other options I'm not thinking about?
Why are there poor finance options for a LLC? I thought the usual thing was just to get conventional financing under your name so you can buy the property, and then transfer it under a LLC.
With a LLC you can only get ARMs from what I found. My goal is to buy and hold so this wouldn't be the best option - I want conventional 30-year.
I thought if you get financing under your name and transfer to LLC you risk the "due clause".
I would shop around for a better umbrella policy. Ours is $270 a year and we have a lot to cover.
Thanks Ann. But going back to the original question, if there are (3) investors in our group, would EACH person need to get their own umbrella policy if we went this route?
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#1 Foreclosures Contributor
- Real Estate Professional
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Then forget the "umbrella insurance" (which is an extra, individual policy, on top of, the subject property insurance). Just get higher limits on the rental property liability.
Umbrella insurance is a personal policy, which will cover your policies (home, auto, etc). I was just quoted $270/yr for a $1M policy for home/auto/1 sfh rental.
I think it's worth it, even without investment properties. You never know when someone might get hurt at your home, or involved in a serious auto accident which is over and above your standard policy liability coverage. In our sue-happy society, having a little extra insurance is usually a good thing.
@Account Closed, my thoughts exactly. I would hate to trigger a due on sale clause. John - do you have any thoughts on the best way a group of three guys need to approach the financing aspect? We originally thought about LLC but we would be restricted to an ARM which we don't want.
Brett Parker
Not sure which turnip truck your insurance guy fell off of, but if he is trying to use personal policies to cover a business entity, there will be issues.
You are forming a partnership. There are many benefits but also many perils to a partnership, consult a local attorney on that.
Thus, you need a commercial insurance policy. A commercial umbrella should not cost over $400 on the high side, and that would cover the partnership.
We are licensed in all US jurisdictions so just PM if you want a more specific consult.
@Derek Lacy, awesome stuff - big reason I post here is for experts like yourself.
To get a commercial umbrella policy, do we have form a LLC or can we get a commercial policy without one?