LLC Insurance - Renovation insurance

11 Replies

Hi.  I need help.  What type of insurance would be best if I bought a home in a LLC, will be doing renovations, living there for 2 years, and then most likely rent it out? Any information would be greatly appreciated!

Did you or are you getting a loan for this property? If so then you will already have insurance. Banks require it. It's the last "I" part of this "PITI." Principal, Interest, Taxes, and Insurance.

If you're not doing any big renovations like adding more units and you are living in the property then the insurance you already have is enough.  

Hi. It was purchased with cash. Quite of bit of renovations before moving in - mainly cosmetics, some electrical and some plumbing. But it seems like, regular homeowner insurance won't work since it's in the name of an LLC. Just wondering if I needed something specific for when it's undergoing renovations, and when I'm living there, since it is named in an LLC. Thank you.

@Angel McClinton

there are a few ways this can work depending on how flexible your insurance company is.

If the renovations are minor, which sounds like they are, then a Homeowners policy will be the best fit.

If your insurance company will not do a Homeowners policy because the title is in a LLC, then purchase a commercial Landlord/Rental Dwelling policy to cover the property, and purchase a Renters policy for yourself. The Renters policy will give you Personal Liability and can cover your personal belongings that are not owned by the LLC.

Once you rent the policy out, then the only option will be a Landlord/Rental Dwelling policy.

Liberty Mutual does Landlord Insurance Quotes at competitive rates. I just spoke to Ian Morse and received my quote while on the phone with him. One thing to caution when looking for Ins, I called State Farm and they won't insure when the SFR when it is vacant, they would insure as soon as I had a signed lease. They recommended another company to insure while vacant. I moved on, I did inquiry with NREIG.com waiting to hear back. Best to find a insurance broker and get multiple quotes at once.

Liberty Mutual example so example (ie this is based on my property)

Your Landlord Insurance Quote $925.00/Year

SFR 1073 sqft 3/1

Replacement cost $145,548 just note my appraisal is 85K 

Liberty Mutual website

You need a vacant policy or course of construction policy while renovations are going on. Then you need a homeowners policy while you live there. When you rent it out you will need a landlord policy.

Sounds like you've been told some companies will not write a standard homeowners policy if the house is owned by an LLC...true. Some won't and some will.

Some companies will write the policy in your name and then add the LLC as additional named insured. If you have business partners who are not spouse or close family I would not suggest the last method (your name + LLC as additional insured).

@Angel McClinton if you are still doing changes especially electrical and plumbing, it's not considered small changes. it's considered major repairs and you really need Builders risk. You cannot get Dwelling policy until it's ready to rent out or live in. You can get a Builders risk policy like I do when I flip the house for couple of months and then change to Dwelling TDP3 policy or something similar. There are many local instate insurance providers who does policy with LLC owners like LightHouse, UPC etc., Talk to the right insurance agent.

A quick word on NREIG mentioned above.  I like their ease of use however save every single communication you have with them. They have failed to cover two of my properties this year due to their error. I have had to prove my case with saved emails. Just got feedback from them on their last error. I will be moving all my properties. Their processes and systems are just not reliable enough for me to trust them.

I have not had a claim with them but I am concerned there will be issues when if I did.

@Angel McClinton I hope all has gone well with the property! I do have a few points to make about the information presented above in order to provide clarity even if after the fact.

If the property is/was unoccupied and being renovated, than you should have a builder's risk (course of construction) policy in place for any structural or major renovations as previously mentioned. For minor cosmetic renovations, a vacant policy should suffice. The name on the policy should be the same as the ownership entity on the title.

When the repairs are completed, there are a few options moving forward. The best path is to list the LLC as the "Named Insured" on either a Landlord/Rental Property policy or under a commercial insurance policy. Some insurance carriers will not write coverage on a personal policy (landlord policy) with the LLC as the "Named Insured." A commercial policy is great for multiple properties title to the same entity or with entities that have 51% or greater common ownership, and the coverage available through commercial insurance may be broader than on a personal policy.

Once insured either on a commercial or personal policy under the LLC name, a separate HO-4 (Renters Insurance) policy should be obtained to cover the personal contents that belong to your family and also your personal liability coverage under your personal names. This allows for you to maintain a true separation from the legal entity and your personal assets.

You should not have the policy for the building written under your personal name with the LLC as an "Additional Insured." If this were to happen, your insurance policy would not be 'triggered' unless BOTH your personal names and the LLC were named in a lawsuit.

Regards,

Tommy Brown

CA DOI License # 0K51144