Home owners insurance X Rental Ins or Umbrella policy?

5 Replies

Hello everyone!

I've started building my portfolio this year and currently I have 3 properties in Cincinatti area with prices ranging around 65k each.

All of the properties are in my name and now I need to decide my insurance direction.

Any tips you guys could give to me of if I should get Home owners insurance, rental insurance or even an Umbrela policy?

Looking forward to also raise my portfolio, so, not sure whats the best way and direction I should go.

Also, changing the properties to an LLC should also be a good direction right?

1st you typically need to have single property insurance.

Umbrella is simple and cheap and for that reason, I consider it a no-brainer. 

No Umbrella policy will cover you w/o property insurance. Umbrella's coverage starts where the property insurance coverage ends.  

The topic of LLC is more complicated and can be looked at from tax benefit and asset protection benefit and has a lot to do w/ risk-management.

While deciding on the LLC yes/no approach may take time and Umbrella is easy and you should not wait for one while you handle the other.

BTW, I am not an insurance agent.

Thanks Dani for your answer buddy!

So, I should then have a property insurance AND umbrella on top of it correct?

(I understand this is just a friendly advise from your end).

Also, when you talk about property insurance, are you talking about home owners insurance or renters insurance?

When I spoke with a layer to set up an LLC (multiple), both the lawyer and the insurance agent recommend having an umbrella policy on top of your regular property coverage. Part of the reason being to mitigate personal risk. The umbrella will help protect other properties and equity in the same LLC. It is best to speak with a lawyer about setting up the LLC because there is a lot to consider and what you do depends on your personal risk tolerance. As far as insurance, you should be pretty well covered with a property policy, umbrella policy, and requiring your tenants to have renter's insurance. It would be quite a feat for a lawsuit to have enough steam to go through all of that. (Not a lawyer or agent myself). I feel the best thing you can do is keep up maintenance on your properties, pick good tenants, get an property policy, umbrella policy, and require your tenants to have renter's policies. With these mitigations in place, when something does happen, the impact is minimized.

@Rodrigo Serzedello

You are the landlord, so you don't get renter's insurance. You first need "homeowners" insurance on each of your properties. It would more specifically called "landlord" insurance since you aren't living there and are renting it out. Landlord insurance is the "landlord" version of the homeowners insurance...

Once you have that as your “base”

Insurnace, the umbrella insurance policy provides additional liability coverage “over and above” the base insurances. That’s why it’s called an “umbrella” policy. But, you have to have the base coverage first.

When having everything under your personal name, the umbrella will provide the additional coverage for everything your own personally and declare on the policy, For example, auto, your personal home, etc. That’s kinda an added benefit.

If you had a LLC holding the properties, you'd have the same thing. Landlord insurance on each property, and possibly an umbrella policy for the LLC's assets.

Transferring properties to a LLC has some

headaches in my layman's opinion. I post on this constantly and people think they can just deed their properties around — sort of. Maybe look at some of my recent posts. Definitely consult a few qualified legal professionals since LLC's are State entities subject to State law and jurisprudence.

Good luck.