Umbrella insurance or LLC for rental
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!
Do Both....and also require your tenants have individual renters insurance as well. A renters policy with $100k in liability and $10k in assets protection can cost as little as $8-10/month.
More layers the better!
To Rachelle P., we've had an umbrella policy in place for about 2 years now. It covers our primary residence and 3 rental homes, and our auto insurance and was especially good to have when our teenager first got her license. Our auto rates did not change at all due to the umbrella. Deductibles did not need to change either. We're with Liberty Mutual. We do not have an LLC set up, although that's on our to-do list.
I would say both as well. And it you want better asset protection, transfer your deeds to your LLC and put them into a Living Trust.
Here was my original thoughts on it, and what I did for my rentals, but then a million people chimed in with even more information in the comments section. Maybe something in there will help you decide which way you want to go-
https://www.biggerpockets.com/renewsblog/2013/08/1...
Hope that helps!
@Rachelle P.
I haven't seen an umbrella request that your auto deductibles be lower, but $500 seams reasonable. The umbrella usually covers the auto so what IS common is to have the company issuing the umbrella request that the 'underlying limits' aka your auto limits, be raised to a sufficient amount. Usually $500,000 combined single limit or $250,000/$500,000 split limits. Bottom line is they want your underlying policy to be beefed up and sufficient. It lowers the risk a claim ever penetrating through to the umbrella limits. $40 a month seems reasonable as well.
And most companies like to have everything together. You can get a different company to write over your existing home and auto but it's harder and not every company wants to accept that. It sounds like everything is legit with your existing carrier and their requests...
hope that helps!
Originally posted by @Colton Goodrich:
@Rachelle P.
I haven't seen an umbrella request that your auto deductibles be lower, but $500 seams reasonable. The umbrella usually covers the auto so what IS common is to have the company issuing the umbrella request that the 'underlying limits' aka your auto limits, be raised to a sufficient amount. Usually $500,000 combined single limit or $250,000/$500,000 split limits. Bottom line is they want your underlying policy to be beefed up and sufficient. It lowers the risk a claim ever penetrating through to the umbrella limits. $40 a month seems reasonable as well.
And most companies like to have everything together. You can get a different company to write over your existing home and auto but it's harder and not every company wants to accept that. It sounds like everything is legit with your existing carrier and their requests...
hope that helps!
@colton goodrich
The $40 is great, but when they bump my auto coverage, which they say is mandatory, the $40 a month becomes $100 a month. I don't want my auto coverage at $500 deductible. Seemed odd that they were making me change from $1000 deductible to a $500 once I have an umbrella policy. Made no sense. Almost ready to get other quotes from other companies, as this company has my home, my autos, and potentially my umbrella. I have teenage sons, so my auto insurance is about to hit critical mass without this upgrade lol
I would definitely go for the LLC option, but the type of financing changes in that case. I can get up to 10 loans with a 30 year fixed, vs if I go w/ an LLC it would have to be a 5 year fixed and 25 year term. That's a big disadvantage in my opinion considering we're at historically low interest rates.
With the loan types in mind, if nothing would happen, we'd be in a better position to keep the $2 million dollar umbrella insurance and not put the properties in an LLC.
Any advice on this aspect?
Originally posted by @Chris S.:
I would definitely go for the LLC option, but the type of financing changes in that case. I can get up to 10 loans with a 30 year fixed, vs if I go w/ an LLC it would have to be a 5 year fixed and 25 year term. That's a big disadvantage in my opinion considering we're at historically low interest rates.
With the loan types in mind, if nothing would happen, we'd be in a better position to keep the $2 million dollar umbrella insurance and not put the properties in an LLC.
Any advice on this aspect?
You are correct although the loans vary. Some of my LLC ones I get 10 year fixed over 20 years etc... Although I would argue that if you should be re-leveraging every 5-7 years and utilizing your equity into other investments. All the 30 year mortgages I've gotten I have refinanced out of in 5 years or less anyway to purchase other homes. YMMV though.
I own 14 rentals in FL and 5 in WA state and cannot find a company that will write an umbrella policy. They all say you have too many rentals.
Would you have the name and number for any company that will write with 19 properties?Thanks very much Pat