How much liability coverage for rental property needed?

Question

Hi all,

First time investor here, partnering with a friend who has invested in other properties before.

He has used a specific insurance broker before, and the insurance broker is saying that the max liability coverage we can get is $300K. My net worth is substantially higher than that, so I would like additional coverage. Is $300K really the max amount you can take out? Or is the broker just misinformed?

I've also read about umbrella policies but wasn't sure about the following:

1) I don't have auto insurance (i don't drive), so wasn't sure if this would affect that. Does anyone know?

2) Does the umbrella policy work for both of us? Or is it individual?

2a) If 2a, how does it work if we bought the house as a tenant in common? Would the umbrella policy only cover up to 50% of the liabilitity? From my understanding, even though we are both responsible for any liability, it's not a 50/50 split (i.e. if it's a 600K judgement (in this hypothetical, assume no insurance coverage) and I have 500K in assets and he has 100K, it's not like I only owe 250K, the court would make me pay 500k right?

Thanks in advance!

Matt Moylan · Answer

@Brandon Glick great questions!

It all depends on your partners broker and the companies they have insurance contracts with.  I know here at the brokerage I work at we have the ability to always go up to 500k on a policy and sometimes up to a million, all before the umbrella

1) You would need to get a named non-owner policy.  This is "auto insurance" for those who don't have a vehicle.  It is most often purchased in someone like your case who is interested in obtaining an umbrella

2) It depends on how the property is titled.  It could easily be that both of you need an umbrella, or it could go on a commercial umbrella policy (if it is owned by an entity)

if you have further questions, feel free to message me directly.