Insurance questions - deductible? liability? umbrella?

Question

Hello, Everyone!I am currently in the process of setting up insurance for a property I bought in Kansas City. I was wondering, the typical insurance you need is: Landlord insurance (for fires, hail, explosions etc..) Liability insuranceMy questions are: What is the generally accepted deductible that I should take for landlord insurance? $3000, $5000, $10000? What is the generally accepted liability insurance amount that I need? I have heard $500,000 but some people have suggested $1,000,000Do I need an additional umbrella insurance to cover for EXTRA liability? Is this what an umbrella policy is?Thanks for anyone who can help me clarify these things!

Brandon Leong · Answer

Thanks Account Closed - Do you think I also need 'umbrella' insurance?

Calvin Lin · Answer

I have 7 rentals in my single LLC, each rental has a $1M policy on it and the LLC has an $3M umbrellas policy to protect the other 6 units in case 1 gets sued for beyond the $1M. It's probably more than what 95% of the landlords out there carry but I sleep better with it.

David Dachtera · Answer

@Brandon Leong,An important point to remember about "umbrella" insurance is that if it has to pay out, it means litigation was brought and you lost. Unless there is isolation between your investment property and your personal possessions and assets - even your other investment properties, they are now all exposed and at risk.That's why the $1MM recommendation on the umbrella policy. Hopefully, that will be enough to satisfy even the greediest opportunist / shyster and keep them from going after your home, car, savings, portfolio, etc.

John Daley · Answer

I would be curious to know how many landlords actually have 'landlord insurance'. In my experience, not many, nor have I seen the need for it. Just my .02I would carry at least $1M in liability. Umbrella insurance is always a good idea and is fairly cheap, but I don't think I would carry it unless you had a larger portfolio of properties that it could cover. The chances of you needing that $1M are slim if you keep your properties in good condition, and I've never heard of anyone actually needing more than that...so it's really up to you. But the name of the game in rentals is maximize rents and minimize overhead and expenses. It's all up to you how far you take that mentality, though...

Brandon Leong · Answer

@Thomas N.Sure - shoot me a PM.

Thomas N. · Answer

@Brandon Leong Congrats on your purchase. Can you provide any details on your KC property? Looking to invest outside of NY also but too many unknowns for me. Yes umbrella covers what your primary insurances will not; home, auto, dwelling fire..etc.

Frank Chin · Answer

There'll be separate insurance policy for each of your rental properties, your homeowner, plus your automobiles. Then I have an umbrella over all off them. Each individual policy covers $500,000 liability. The umbrella in coordination covers liability beyond the the $500,000 for each and every single one of them, meaning it has a $500,000 deductible.I recall I had to switch to a commercial umbrella when the number of properties beyond 5 or 6, much more expensive. The agent I used earned his commission when he found a company covering me non commercial.

David Dachtera · Answer

@Brandon Leong,Why not discuss that with your insurance agent?I'm not an insurance guy and I don't take that approach to liability issues. My entities are insured, but I use an entity structure for asset isolation and liability protection.

Brandon Leong · Answer

@David DachteraIs there a difference between liability insurance and an umbrella policy?My understanding is that liability insurance covers that specific property and an umbrella policy is EXTRA liability cover across multiple properties. Am I correct?

John Daley · Answer

You may be right. I seem to recall my insurance agent calling my insurance a 'fire policy' on some of my single family rentals. I bet that's the same thing.I'm just leery of insurance agents using fear to sell extra insurance programs to gullible individuals. With rentals, every penny you can save goes straight into your pocket. Things like additional insurance coverages, home warranties, etc, all seem like good ideas but I've actually used some of these things and they never pay off in the end. I do, however, pay extra for quality insurance policies that do not prorate needed repairs based on the age of the item getting repaired. My insurance is a replacement policy that replaces whatever is damaged with a new one and they take care of the whole bill (less the deductible). In my mind, those policies are worth paying a little extra for...especially on older houses.