LLC Named as "Additional Insured" on insurance polity

Investor · Conroe, TX · Member since 2015 · 14 posts · 2 votes

During 2015, I set up a Texas Series LLC to hold my 8 single family home rental properties. My attorney filed deeds to transfer the properties out of my name - into the name of the individual series within my LLC. Rather than cancelling the insurance policies in my personal name, my insurance agent suggested that I simply keep the policies in my name but name the LLC as an "Additional Insured" on the policies. Apparently, this is how her investor clients handle insurance.

I'm wondering if this is an acceptable approach, or should I cancel my current policies (with the LLC named as an additional insured), and get insurance in the name of the LLC. Of course, my goal is to maintain the integrity of my asset protection plan.

Has anyone considered this issue?

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Tommy Brown

Specialist · Danville, CA · Member since 2019 · 17 posts · 10 votes

This thread may be dead now, but I will be adding this for anyone who stumble across this forum.

The "Named Insured" on the rental property should be the same name as on the title. In the above instances, the property should be insured under the name of the LLC. Some personal lines insuring carriers will offer this product, but not all are willing to write a policy this way.

Additionally, a commercial insurance policy is a great way to go for higher limits of liability and often broader coverage options included coverage for newly acquired buildings before the insurance has been set-up (particularly good for property investors with large portfolios who do not always contact their insurance provider quickly). Multiple LLC's or Corp's with 51% or greater common ownership can also be added in most instances, naming the additional entities as "Additional Named Insured" to the policy. This provides the same level of coverage as being a "Named Insured."

Insuring the property under your personal name and adding the LLC as an "Additional Insured" is the easy "fix" that agents use, but it provides narrower coverage than when listed as the "Named Insured." The limitation is that in order for liability coverage to be triggered or potentially even defense from your insurance company, BOTH your personal name and LLC would need to be named in a lawsuit.

My advice is to find an insurance professional in your area who understands the needs of property investors and the differences between a "Named Insured" and "Additional Insured." There is no sense in leaving oneself open to such a potential disastrous lawsuit without coverage which could have been remedied with a correctly written insurance policy.

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Shawn Thom
Investor · McKinney, TX · Member since 2012 · 588 posts · 224 votes
10y
Funny you mention this, my insurance agent did the same thing when I switched my rental from my personal name to LLC. I'm in Texas as well and this property is insured with Encompass Insurance.
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Rod HanksBusiness Member
Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
10y
Hi Jim, the best way to do it would be to setup a commercial policy to cover all the properties under the LLC. It is just easier to add the LLC on your current policies as additional insured than it is to setup a new commercial policy. I have several rentals in my name on personal policies and have just setup a commercial policy and I will move them over as they renew. Hope this helps and good luck!
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Jason BottPro Member
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
10y
@Jim Breedlove @Shawn Thom
Additional Insureds have coverage limited to the business relationship with the Named Insured on the policy, in this case, your personal name. The LLC will not have coverage is it gets involved with any other operation besides the management of said property.
As @Rod Hanks references, at some point you may want to restructure to a commercial policy and eliminate this possible gap in coverage.
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Tommy Brown
Specialist · Danville, CA · Member since 2019 · 17 posts · 10 votes
7y
This thread may be dead now, but I will be adding this for anyone who stumble across this forum.
The "Named Insured" on the rental property should be the same name as on the title. In the above instances, the property should be insured under the name of the LLC. Some personal lines insuring carriers will offer this product, but not all are willing to write a policy this way.
Additionally, a commercial insurance policy is a great way to go for higher limits of liability and often broader coverage options included coverage for newly acquired buildings before the insurance has been set-up (particularly good for property investors with large portfolios who do not always contact their insurance provider quickly). Multiple LLC's or Corp's with 51% or greater common ownership can also be added in most instances, naming the additional entities as "Additional Named Insured" to the policy. This provides the same level of coverage as being a "Named Insured."
Insuring the property under your personal name and adding the LLC as an "Additional Insured" is the easy "fix" that agents use, but it provides narrower coverage than when listed as the "Named Insured." The limitation is that in order for liability coverage to be triggered or potentially even defense from your insurance company, BOTH your personal name and LLC would need to be named in a lawsuit.
My advice is to find an insurance professional in your area who understands the needs of property investors and the differences between a "Named Insured" and "Additional Insured." There is no sense in leaving oneself open to such a potential disastrous lawsuit without coverage which could have been remedied with a correctly written insurance policy.
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