Who much should an umbrella policy cover?

Question

Hi! We have about a dozen properties in upstate NY. We wanted to get an umbrella insurance policy to cover the portfolio but we’re unsure what to cover. Do you get coverage for what the portfolio is worth or for how much someone can potentially sue you for? Thanks!

Randy Rodenhouse · Answer

Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto, etc.  Typically, it is a liability coverage and not a damage coverage. Also, if you have rentals they usually require $500k liability on the landlord policy before they will add umbrella policy.  You need to talk to an insurance specialist.

John Mocker · Answer

Andrew,

Umbrella policies are generally sold in increments of $1,000,000.  They can be Personal Insurance policies or Commercial Insurnace policies.  As Andrew mentioned, They have required limits on the underlying policies.  There is no guidelines on how much coverage to have on an umbrella.  What limit you chose is a personal decision.  I would have a discussion with your real estate attorney and Insurance agent about what they are seeing for verdicts in your area.  Also, discuss the likelihood of a lawsuit piecing the veil, how much equity you have in the properties under the LLC, likelihood of multiple claims coming from one property, etc.  Based on all that info you can get a feel of what amount of coverage will keep most claims within the Insurance.