Do I need an umbrella policy??

Question

I am a first-time home buyer. The property is a duplex and it will be my primary residence once tenants clear out. The current landlord is giving lease termination notice before I close I plan to rent the upstairs apartment to current or new tenant.

Do I need an umbrella policy or will homeowners insurance be sufficient? Also, is there any reason I would need to establish an LLC?

If there are any PA brokers looking for business, please message me. I would love to have a conversation about my situation to ensure I’m adequately covered but not paying for anything unnecessary.

Thanks in advance!

Robert F. · Answer

Thank you all for the great input!

John Mocker · Answer

Robert,

Most Homeowners policies will include Liability coverage.  Most of them can cover up to $500,000 limits for Liability.   An Umbrella policy provides additional coverage if the limit on your Homeowners or Auto policy is exhausted due to a covered claim.  It also provides coverage if the limits on a Boat, Motorcycle, ATV, Classic car policy is exhaused.  Generally it is rated based on the # of properties, # of vehicles, and Limit (sold in multiples of $1,000,000).  Some also factor for the age of drivers, driving record, prior losses, etc.  Depending on your area and rating factors, it could be in the $150-250 range.  Not bad for an extra $1,000,000 in coverage.

Discuss with your Insurance agent and Attorney the recommendations on if the $500,000 limit is enough.  My guess is they will recommend getting it.

Victor Hong · Answer

A liability judgment can take not only current assets, but also future assets and income.

Karolina Powell · Answer

Agreed with Owen.  Until you get to a more substantial net worth, you can do without an umbrella as it is unlikely that anyone would want to sue you since most of your home and 401k are protected against creditors.

Owen Rosen · Answer

Based on this, I don't believe you'll need an umbrella policy then. Just make sure to get $500,000 or $1 million liability coverage on the property and you should be OK.

Robert F. · Answer

I guess my only assets would be retirement accounts, my car, and my golf clubs 🤣

Is that what you mean?? My total net worth is about 80k.

My realtor mentionedan umbrella policy so I’m trying to understand why or when that type of policy makes sense