Umbrella insurance - what questions/considerations to ask

[Ray Heraldo]

Hi BP community,

First off, I appreciate having this forum to learn from others. So much good info! :-)

I'm about to reach out to my ins. co. about adding umbrella ins. to include/add rental properties. My primary in Ca. and I have rentals in Utah and Fl. My initial questions I have:

1. Does umbrella ins. work across state lines?

2. How do I determine how much insurance to get?

3. What other questions, considerations should I ask/think about?

.

Note: I'll be looking to put rentals into LLC(s).

Thanks in advance!

Ray

[Ricardo R.]

Hey Ray,

Good move looking into umbrella coverage — most investors skip it until something bad happens. You’re asking all the right questions already.

1. Yes, umbrella policies can cover multiple states — but only if your base (underlying) policies are properly set up. Each rental’s regular landlord policy needs to list you (or your LLC) as the named insured and have the liability limits that meet your umbrella’s minimum requirements (usually $300k–$500k). The umbrella then “sits” on top of those.

2. How much to get?
A common rule of thumb is $1M for every $1M in net worth, but honestly, go by your total exposure — number of doors, assets, and how much risk you want to sleep through. Most investors carry $1–3M. It’s surprisingly cheap (often $200–400 per year per million).

3. Things to ask your agent:

• Will this cover all properties owned personally and through LLCs? (Some umbrellas only cover personal ownership unless structured right.)

• Are short-term rentals included or excluded? (A lot of policies quietly exclude Airbnb-type stays.)

• Are you covered for legal defense costs? (You want that outside the liability limit if possible.)

• Does the policy automatically extend to future properties or do you have to call each time you add one?

You’re doing it in the right order — get the umbrella figured out, then move the properties into LLCs so you can layer liability protection both legally and through insurance. Ray, I hope this really helps you but full disclosure I'm not an insurance professional, I'm a real estate investor/agent/manager, so you definetely want to work with an insurance person, I sent you a DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you.