San Jose, CA · Member since 2015 · 19 posts · 3 votes
I just did a quit claim deed two properties from my personal name to LLC, but mortgages are still under my name. My insurance agent told me that I should have my LLC as a main insured and my name additional insured. He also told me that I should I have two properties in the same policy since they are under the same LLC (currently, only one property is with him) . Can anybody please confirm if I should do that? I'm afraid of due-on sale clause if the insurance policy is under the LLC. What is the properly way to do for insurance ?
@V.G Jason I had a lawyer review a policy under individual name with LLC noted as additional insured - he was ok with that arrangement.
If your personal name is on the loan or if the LLC is single member I understand you carry some personal litigation exposure. Your personal umbrella is the next safeguard.
From my understanding your insurance policy is useless if it's under your name and the property is under the LLC. Needs to be aligned for you not to get pierced. Someone more experienced can reply, but I was told this too for both my two properties and did so.
Insurance isn't cheap. As for due on sale clause, I don't think that can be immediately provoked. Have you made regular payments on them? If so, I doubt they call on it. If they do, threaten to re-fi with someone else. If you're a paying borrower, they'll chill.
From my understanding your insurance policy is useless if it's under your name and the property is under the LLC. Needs to be aligned for you not to get pierced. Someone more experienced can reply, but I was told this too for both my two properties and did so.
Insurance isn't cheap. As for due on sale clause, I don't think that can be immediately provoked. Have you made regular payments on them? If so, I doubt they call on it. If they do, threaten to re-fi with someone else. If you're a paying borrower, they'll chill.
Yes, insurance is super expensive. It makes sense that insurance should be aligned with the LLC.
Your insurance agent is misinformed... you can still write the policy in your personal name (unless the LLC is a partnership of some kind) and then list the LLC as an additional insured. The LLC must be listed as an additional insured as the LLC is the "legal, titled owner" of the property.
By having your insurance policy written in the LLC makes the policy a commercial policy which in most cases makes the policy more expensive.
As for due on sale clause, those are usually bank specific. However, most people that I have encountered have not had issues with mortgages remaining in their personal names as long as the payments are always made on time and the loan remains in good standing.
I thought I did a quit claim deed on my property but found out years later that it was still under my name. I thought that because I signed and notarized it when I submitted it to the county office that everything was complete. When I tried to get the title cleared recently I found out that the quit claim deed was never processed and I never received confirmation. Lesson learned...dot all the i's, cross all the t's, and get physical copies of everything in writing.
Your insurance agent is misinformed... you can still write the policy in your personal name (unless the LLC is a partnership of some kind) and then list the LLC as an additional insured. The LLC must be listed as an additional insured as the LLC is the "legal, titled owner" of the property.
By having your insurance policy written in the LLC makes the policy a commercial policy which in most cases makes the policy more expensive.
As for due on sale clause, those are usually bank specific. However, most people that I have encountered have not had issues with mortgages remaining in their personal names as long as the payments are always made on time and the loan remains in good standing.
You can have the policy in your name? Well better question is should you? What are the repercussions if you're sued?
@V.G Jason I had a lawyer review a policy under individual name with LLC noted as additional insured - he was ok with that arrangement.
If your personal name is on the loan or if the LLC is single member I understand you carry some personal litigation exposure. Your personal umbrella is the next safeguard.
@V.G Jason Yes you can. My agency sets them up almost on a daily.
There are a few things at work here. A LLC does not indemnify you from a tenant or someone who gets hurt on your property. It can help to isolate your other properties or investments from being brought into the suit; but, that is only if you follow all the strict "arms length rules, IRS rules, state, and local rules, and on and on.
2nd a standard LLC does not provide anonymity. So I can see that john smith owns 123 LLC. that is pretty easy. and at the end of the day you are still liable for what happens on your property.
If you are wanting better anonymity, personal and asset protection, with a built in estate plan you would be better served by creating series LLC and utilizing land trusts. There is tons of info on it here on BP. https://www.biggerpockets.com/... and some RE attorneys such as @Jason Marino or @Olia Fogel who could answer question or help you with that.
So your insurance is kind of your 1st line of defense. Well your 1st line is to not be a crappy landlord. But Insurance. Insurance is anonymous. Insurance contracts (a policy is a contract) are privately held contracts that are not on the public record. and they aren't searchable (to my knowledge) there isn't a database where you type in a persons name and you see all the insurance policies that they have.
As the homeowner/landlord when you have to refer to yourself in relation to the property and your insurance of that property you refer to yourself as "THE INSURED" This gives you what is needed to be the authority without saying that you are the owner.
Make sure that your insurance policies are good policies, from good companies, that have good claims payout ratings. Work with a good Insurance agent, they can help you if you have claims, and if you get sued call your insurance company, they have lawyers to handle the situations.
If you set up the policy in the name of the LLC it is 80-90% of the time more expensive for the same coverage, and you still have to put your name on the policy.
There are times that it makes sense to have the policies in the name of the LLC, it is probably less than 10% of the time though.
My insurance agent has our landlord policy under our personal names and lists the LLC as additional insured. So the opposite of what you're describing. Now you have me wondering if she did it right..we own our property free and clear though.
@V.G Jason I had a lawyer review a policy under individual name with LLC noted as additional insured - he was ok with that arrangement.
If your personal name is on the loan or if the LLC is single member I understand you carry some personal litigation exposure. Your personal umbrella is the next safeguard.