STR entity set up- LLC vs. increased liability and umbrella insurance

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STR entity set up- LLC vs. increased liability and umbrella insurance

Allison Hertzberg
Member since 2025 · 10 posts · 6 votes

Hi hear conflicting things about the right way to structure STR protection.

I have a second home in my personal name that i also rental out throughout the year on different OTAs. It's worth about $500k. My home insurance covers str and up to 300,000 personal liability, then i have an additional 300,000 with an umbrella policy.

If do a quitclaim and transfer a deed into a single person owned LLC, that gives some personal protection but not much, and not anything in terms of payout if needed.

If i ask a lawyer they will say to do the LLC. If i ask other investors who buy in their personal name, they say they haven't set up llcs....

What have you done and recommend and why?>

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  • LaTarence Dunbar
    Lender · Washington DC · Member since 2026 · 75 posts · 21 votes
    6d
    Quote from @Allison Hertzberg:

    Hi hear conflicting things about the right way to structure STR protection.

    I have a second home in my personal name that i also rental out throughout the year on different OTAs. It's worth about $500k. My home insurance covers str and up to 300,000 personal liability, then i have an additional 300,000 with an umbrella policy.

    If do a quitclaim and transfer a deed into a single person owned LLC, that gives some personal protection but not much, and not anything in terms of payout if needed.

    If i ask a lawyer they will say to do the LLC. If i ask other investors who buy in their personal name, they say they haven't set up llcs....

    What have you done and recommend and why?>

    Asset protection for a short term rental involves more than simply deciding whether to hold title personally or through an LLC. The existing mortgage terms, proper STR liability coverage, and alignment between the ownership structure and insurance policy all need to be considered. I'd be interested in connecting and hearing more about your investment strategy. Always good to connect with fellow real estate investors and exchange perspectives.

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    • Allison Hertzberg
      OP
      Member since 2025 · 10 posts · 6 votes
      6d

      thanks! I've checked out those levers. My mortgage lender is good with it, my insurance provider is too. Now it's just do i do it or not.

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  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    6d

    Read my hundreds of posts on this subject. Where 99% of investors fail is their inability to articulate the risks, liability events or claims that are most likely to come into play as a property owner and understanding how and why the asset protection strategy or insurance strategy will benefit you in the event one of those liability events occur. LLC's and umbrella coverage provide entirely different benefits, but only when used properly. Sadly there's a lot of attorneys and insurance brokers out there selling products and services that are completely impractictical to a real estate investor.

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  • Owen RosenBusiness Member
    Professional · Clinton Township, MI · Member since 2015 · 682 posts · 259 votes
    3d

    Are you sure the umbrella coverage is only for $300,000? Usually true umbrella coverage comes in increments of $1 million.

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  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 673 votes
    3d

    An LLC and an umbrella aren't substitutes for each other. The LLC is about separating the asset and how claims reach you. The umbrella is about how much coverage sits on top when something happens. A lot of the "just do an LLC" vs "I never bothered" advice skips that distinction.

    If you do form one, the paperwork alone isn't the protection. Open a dedicated bank account, run the STR payouts and expenses through it, and keep personal spending out. Courts care about whether you treated it like a separate business.

    I'm not a lawyer, so I'd want a local attorney and your insurance agent in the same conversation — especially on a quitclaim and whether the lender or the STR policy needs to be updated when title moves. The structure only helps if the banking and the policy match it.

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