Umbrella policy for rental units

[Jem J.]

I'm into my 3rd rental properties (with very decent renters) under  personal ownership. We increased our umbrella policy to 2 million. Insurance agent advised that this should be ok. Any thoughts?

[Jeff Bridges]

Originally posted by @Peter Tverdov:

@Jeff Bridges wouldn't I be covered if someone sued for everything? 500k on each + 1m total is 2m.

 This helped me understand umbrella claims better. It looks like you have 1.5 million in coverage, but not the 2m you originally thought. In a lawsuit, you only make a single claim against your homeowners policy, then on your umbrella to cover excess in response to that lawsuit. You are not actually making claims against your other properties in that case; those are just assets that you need to defend during the lawsuit. Those only kick in as a result of an incident related to that particular property and don't apply if its only related to a different property. Your umbrella backs each of these up as excess coverage. My school of thought is to make sure to insure just over my net worth, but not too much above it since counsel in a lawsuit can then try to make you settle for your higher umbrella coverage rather than actual net worth if they find out about your policy limits.

Another helpful link:

http://www.financialsamurai.com/how-does-an-umbrella-policy-work-and-how-much-does-it-cost/