New Investor - need another umbrella?

Question

Hi there,

I currently own a primary residence in California, and am closing on two SFH's in Missouri -- I have a Umbrella policy in place to cover beyond my homeowner's insurance for my primary home in CA, but my local agent says I can't add the MO properties to the Umbrella, and referred me to a local MO agent who wants to write me another Umbrella for those.  Is this correct?  Do I need a separate Umbrella for every state I buy property in?  The Umbrella is with Allstate, so you'd think they'd be able to underwrite across state borders.  Appreciate any thoughts/advice!

Account Closed · Answer

@Dave Blackman I would think that the inability to put your Missouri properties on the umbrella has more to do with the number of properties you have than it does with crossing state lines. You should be able to purchase one umbrella for all of your investment properties (regardless of state lines) and one umbrella policy for your personal insurance needs (home, auto, etc.).

A typical structure is to have a general liability policy specific to each property ranging from $100,000 to $1,000,000. (Increasing these limits is pretty inexpensive) You then have one umbrella policy ($1 million to $10 million limits) that can provide liability coverage for all of your properties in the case that the primary layer is exhausted. It is unlikely that you will ever need this extra layer of coverage but for $500 or so it may be worth the assurance you are protected.

I think it is worth noting three major differences in the MO and CA property insurance markets.

Earthquake: a major fault line runs through St. Louis that has not been active for the last 100 years. However, buildings in Missouri are not built to withstand an earthquake so if one were to ever occur most older properties would be totally leveled. For this reason purchasing earthquake insurance is something I would consider.

Wind/Hail: It rains in St. Louis around once a week and large hail is a regular occurrence. For this reason, your wind/hail deductible is much more important. If your properties have older roofs it is only a matter of time until you have a hail claim.

Agreed Valuation: Most of the rental properties with good cash flow our close to downtown and can be upwards of 100 years old. The cost to replace these homes as they are would likely be much more than the way you would actually rebuild (i.e. brick covering 100% of the home, wider hallways etc. For this reason, I recommend trying to get an agreed value policy which allows you and the insurance company to agree on the value of the home upfront. This strategy allows you to agree on a value that more closely reflects how you would actually rebuild the home without being subject to an under-insurance penalty.

Gerald Grinter · Answer

@Dave Blackman I agree with @Jason Bott. You are approaching the point where insurance companies will be gin to view what you do as a business and will want to you cover your rentals this way. And crossing state lines makes this even more of a necessity so as to not blur the lines of coverage. Which means exactly what Jason recommends.

Jason Bott · Answer

@Dave Blackman Yes, you will most likely need 2 separate insurance programs.  1 for you personal and another for business operations "rentals".  If you had all the property in CA, then you could probably find someone to do it, but different states is the issue.

Dave Blackman · Answer

Account Closed thanks, some great info -- much appreciated!

Marco G. · Answer

@Dave Blackman - I have an auto policy with a $300k liability limit with Geico.  I have a homeowners policy on my primary with Progressive with a $300k liability limit.  I have investment property in another state with Landlord policies through Allstate.  Geico allows me to add up to 4 units of investment property to the original umbrella at no additional cost, and doesn't cover more than 4.  So liability arising out of ownership of those 4 units over $300k is covered.  The primary isn't a specifically listed property.  I have separate excess liability policies from another insurer for units 5 and beyond.

The Geico umbrella covers me and my primary in one state, and excess liability for 4 of the my rental units in another state.

Chris Le · Answer

Hey Dave,  I have an Umbrella program that will insure your out of state properties in other states as long as your primary home is in CA.  Message me if I can help.  Thanks!

Scott McMillan · Answer

I have policies with agents located in the same state as the properties are.  Yes, my one umbrella covers both properties.  Typically as long as all of the properties are with the same insurance company it is ok.

Dave Blackman · Answer

@Mark Nolan been listening for months -- love them!

@Natasha Keck sounds like that is the uniform advice in this thread -- thanks for your comment!

@Ronny Soto yep I do have one for each (with Amica) -- lender requires it anyhow! :)

@Scott McMillan do you mean you have landlord/HO insurance with each agent but just one central Umbrella that covers both?

Dave Blackman · Answer

Thanks for all of the replies, I appreciate it more than you know!  @Jason Bott and @Gerald Grinter I have separate homeowner's insurance on my primary and one for each rental, all with Amica.  My Umbrella currently adds liability to my personal residence & auto insurance (both with Allstate).

So as I understand, it's up to the insurer to go cross state, but @Marco G. it looks like you only have your rentals under the cross-state umbrella right?  If not, maybe only some insurers do all together and some require separate for rentals, re: @Jason Bott's comments.

Interesting world insurance is...I'm pretty risk averse due to how highly I'm leveraging myself to start out, so I don't mind paying extra to be covered for anything and everything.

New Investor - need another umbrella?

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