Umbrella insurance or LLC for rental

[Varinder Kumar]

I'm trying to be extra cautious incase something happens at my rental in which I would need more coverage. My friend put his rental in a LLC and he states it will cover him if there is a lawsuit etc. My realtor was recommending an umbrella insurance coverage of a million dollars. Which is the best way to go? Currently I own one SFR but do plan on purchasing more soon. Please advise my fellow BPrs thanks!

[Bryan O.]

@Varinder Kumar they are 2 different types of protection. The LLC can protect your personal assets from suits arising from assets owned by the LLC. The umbrella can help if the veil is pierced, but it also protects your LLC assets from suits arising from you personally. Here are 2 examples:

• Slip and Trip Suit: Everyone's favorite example. A fall on the property and a suit. They can get assets in the LLC and no more
• You run over a pedestrian in a crosswalk: Personal suit that can extend right into every interest you own (all of your LLCs). Umbrella absorbs the costs before your LLCs

These are not necessarily either-or strategies. They are complimentary and directional. LLCs protect from the outside in. Umbrella protects from the inside out. Look at your situation, understand your personal risk tolerances, and decide what is best for you. There is no "right" answer, only what makes sense for your situation.

Personally, I recommend umbrella for everyone because it is so inexpensive. An LLC may or may not be worthwhile, but you should understand it to know if it is something you need.