Hi BP community,
I've been a lurker for a few months but finally decided to join the BP community.
My question is regarding purchasing homeowner's insurance for properties held in a single member LLC? I've read that you need to get commercial property insurance even if the the property your LLC hold's are SFR's. The reason I ask is because the commercial property insurance is significantly more expensive. Spoke to my insurance agent and he said you can just get residential property insurance and put the LLC as "added insured". For some reason that sounded suspect to me so I was wondering how way more experienced people deal with the insurance situation?
For reference, I've only got 3 SFR's (hoping to close on my 4th in March) and was persuaded to put them all into a single member LLC. Do you guys think that it would be better to purchase future properties in my own name and just get umbrella insurance ($5 million liability) to cover myself? I'm still very new so I don't anticipate venturing beyond SFR's in the foreseeable future. It's much easier to get traditional financing as an individual...
Thanks for all your help!
Your insurance agent is on the right track. The primary insured should be the property owner (LLC) and you (Neal) would be the "additional insured." At least that's how I have mine set up.
Mark thanks for the response. I think your insurance guy is better informed. I've got mine opposite of yours; the primary insured is me and my LLC is the "additional insured." Do you know if your policy is a regular residential homeowners policy or a commercial policy?
@Neal Li the correct way to insure the property is to get the policy in the name of the entity that owns the property.
Also, don't get hung up going with Commercial/Personal insurance policies to control premiums. I have personal lines companies that can do LLC's and Commercial policies that are less expensive than most personal lines companies....Sounds like you just need to see some more options from some other insurance companies.
@Mark Bookhagen If you have the policy in the name of the LLC, 99.9% of policies will extend coverage to the owners of the LLC.
I say 99.9% because I don't represent 100% of the insurance carriers in the US, so there may be one out there that has unique language in thier policy, but this is the standard practice.
@Neal Li - Yes mine is a regular resi Fire Policy bundled with liability. Also, the difference in premium between $500k and $1MM liability will surprise you (it isn't a lot), which is why I opt for the higher limit.
@Jason Bott - I agree 100%; I'm just overly cautious since it doesn't hurt to have the members/managers listed additionally even though it isn't needed.
Guys that's really great info I really appreciate it. I think I need to contact some other agents. You guys seem to have the right ideas. Really appreciate the assistance.
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