Another question about Umbrella policy versus LLC.

[Cynthia D.]

I have searched and read some info here on this topic, and have learned a lot. My specific scenario was hinted at but not completely explained, and I was hoping for some insight:

I have 3 single family rental homes. I have good base liability insurance on all and a healthy umbrella policy. I lease the homes through an LLC that I am manager of. I manage the properties myself, and in most cases, I perform maintenance and repairs myself.

Since I am the manager (of property and LLC), am I correct when I think that if there is an accident on one of my properties that could be tied to a theoretical maintenance issue, like an electrical fire or a broken step, and tenant sues, tenant's lawyer will come after me personally as the property manager regardless of the LLC?

And my umbrella policy will cover that action.

So at this point, with just 3 properties for the forseeable future and solid liability coverage through insurance, is my LLC unnecessary?

[Tim Norris]

It is really not an issue of "either/or" as an umbrella and an LLC are/could be created for different reasons. Think of the LLC and other work you may do with legal and financial advisers (such as attorneys and accountants) as your "castle walls and moat" around your assets, personal and otherwise. Think of the insurance you secure as an "archer in the watchtower". In other words, the walls and moat should be your foundation as it pertains to protecting you/your assets. The archer (insurance) won't pick off every bad guy that tries to get in, so having the walls and moat is vital. Think of them working together not in lieu of each other. Hopefully this helps!