We run a two-unit STR here in Portland. Two LLCs are involved - one owns the real estate (and another unrelated LTR property) and the other LLC operates the STR business. The STR business LLC leases to the real estate LLC. It might be overkill but we were advised to go this route by lawyers and have kept this arrangement (I'm curious if any others do this but that's not my main question now).
We currently have two insurance policies - one for the LLC that owns the property and another for the LLC that operates the STR business. I've worked with our insurance broker to ensure that each policy covers the correct risks. A lawyer we worked with years ago recommended two separate insurance policies.
I've got a quote in hand from an insurance company that specializes in STR insurance. They claim that their one policy would cover both LLC's risks. The cost for their policy is essentially the same as the cost of the sum of the two existing policies.
Question - does anyone have experience with a similar situation and if so how do you insure your properties/LLCs?
Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
1mo
Since the purpose of having two different LLCs is to keep them legally separate in a case of liability, wouldn't having one insurance policy for both negate that separation?
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
1mo
This is complex and likely best answered by an attorney, but what @Lauren Kormylo makes sense to me, comingling funds can pierce the corporate veil so it makes sense to me comingling insurances would be the same.
Insurance Agent · Orlando, FL · Member since 2015 · 297 posts · 122 votes
1mo
If the lawyer that set everything up recommended two policies and the coverage cost is identical, what is the motivation to move policies? Or is it just doing the mental exercise to better understand it?
Thank you for the responses. I think deep down the complexity of maintaining two LLCs feels hard/expensive so I tend to want to simplify. But points made above about following the logic of separate LLCs so therefore separate insurances policies is the logic I should continue to employ.
So I guess I'm still interested if others use this same two-LLC approach of owning and operating an STR or other rental? If so, why? There are decent risk and tax benefits, but a good amount of cost and effort required to maintain it.
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
1mo
I am not even sure why there are two LLC's. I kinda get it but I am not sure you are benefiting from them.
Anyways, this is pretty complex. LLC's aren't that hard to pierce in regards to negligence. Contract stuff, OK but if you don't keep up the STR and there is a preventable accident, you will be on the hook.
Are we talking about a single property with 2 units or 2 separate properties (I don't mean APT A and B.)
I would get back with the attorneys who advised this and make sure combining the insurance polices is the right way to go. I would guess that the STR policy on the property and the business policy on the business?
I am also wondering about the taxes with such an entity.
Lender · NJ · Member since 2025 · 50 posts · 23 votes
1mo
I'd keep the coverage tied to the actual roles of each LLC. The LLC owning the real estate should have the property coverage, while the operating LLC should have coverage for the business activity and its associated liability.
If one policy is claiming to cover both, I'd have the broker confirm in writing that both LLCs are properly named/covered and that the policy covers both the property exposure and the STR operations. That distinction would be important to me before replacing the two existing policies.
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1mo
@Brian Crumrine, I’d focus less on the number of policies and more on whether the actual risks and entities are clearly covered in writing.
If one LLC owns the real estate and another operates the STR, I'd want the broker/carrier to confirm exactly who is the named insured, who is an additional insured, whether the policy covers the building, furnishings, guest liability, business operations, loss of rental income, and any claims arising from the operating LLC's activities. A cheaper single policy can be perfectly reasonable if it truly covers both sides, but I wouldn't rely on a verbal "yes, you're covered." I'd want the endorsements and policy language to show it.
I'd also make sure the lease between the operating LLC and property LLC lines up with the insurance structure. If the lease says one entity is responsible for certain risks but the policy insures the other entity differently, that can create problems when there's actually a claim.
From the tax side, I’d have the CPA review the entity classifications and related-party lease too. Depending on how the LLCs are owned and taxed, the federal tax treatment of payments between them can differ. Separate books, clean documentation, and making sure the structure has a real business purpose are important.
And since this is an STR, I'd still keep material participation and cost segregation in the broader planning picture. The entity and insurance structure protects the operation; the tax structure determines whether the deductions you generate are actually useful.
Investor · Pacific Northwest · Member since 2026 · 538 posts · 302 votes
1mo
I think one thing in the replies is getting conflated: having two LLCs does not automatically mean you need two separate insurance policies. The entity structure and the insurance structure are related, but they are not the same thing. What matters is whether the policy actually covers each entity for the risks that entity is supposed to carry.
In your setup, one LLC owns the asset and the other creates most of the operating exposure. That makes sense conceptually. The property company has the building and real estate risk. The operating company is dealing with guests, bookings, operations, vendors, and the day-to-day STR activity.
So instead of asking the new carrier, “Are both LLCs covered?” I’d give them actual claim scenarios and make them explain exactly how the policy responds.
A guest falls and sues both LLCs. What happens?
The operating LLC causes damage to the building owned by the property LLC. What happens?
The building becomes unusable for four months after a covered loss. Which LLC receives the lost-income payment, and how is that amount calculated?
Someone sues the operating LLC over something arising from the STR business that has nothing to do with physical damage to the property. What responds?
Those answers are going to tell you a lot more than whether there is one policy number or two.
I'd also pay close attention to limits. Even if both LLCs are properly insured under one policy, they may still be sharing the same aggregate limits. That matters even more because you mentioned the property-owning LLC also owns another unrelated LTR. I'd want to know whether one large STR claim could eat into limits that are also protecting the other property.
The lease between the two LLCs should also line up with the insurance. If the operating LLC is supposed to indemnify the property LLC for certain losses, maintain particular coverage, or protect the owner entity from operating claims, the policy needs to support that arrangement rather than quietly contradict it.
Since the new policy costs essentially the same as the two policies you already have, I personally would not switch just for simplicity unless the carrier can show me an actual coverage advantage.
I’d ask for the full specimen policy and endorsements, not just the quote summary, and have the broker walk through the differences side by side with your current coverage.
The question I’d want answered is pretty simple:
If a $1 million claim happens tomorrow, does one policy leave the two LLCs in the same or better position than the two-policy structure?
If nobody can answer that clearly, I’d keep what you already understand.
Property Manager · Melbourne, FL · Member since 2019 · 245 posts · 120 votes
1mo
I'd stop trying to simplify it and make the broker put the coverage in writing. Which LLC is insured, who owns the building, who covers operations, guest liability and lost income. The number of policies matters less than whether there is a gap.
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