LLC's vs Umbrella Policies for California Residents

[Jared Friedman]

Hello. Im looking for feedback regarding the following issue i am facing. I currently own 3 Rental Properties. 2 of the properties are in California and 1 is in Alabama. As of now i carry a 4 Million dollar umbrella policy for liability. I am considering buying 5-10 more rentals over the next year. I own my 2 California properties outright with no mortgages. One is valued at $500k and the other at $300k. The other properties i am looking at buying are through a very reputable turnkey company with in house property management and fully rehabbed homes. I am debating setting up LLC's but as a California resident there is a $850 annual fee per LLC in addition to filing taxes separately and also my insurance would double as it would be deemed commercial property. I hear most people go the LLC route but California is crazy expensive to do so. I'd be looking at possible a $9K-10K per year if i owned 10 homes in separate LLC's. From a theoretical standpoint i understand the benefits of the LLC for lawsuit protection but It seems like its unnecessary if I'm covered for $4 million with my umbrella. My net worth is $3 million. I couldn't imagine any landlord getting sued for over $4 million from a tenant lawsuit. Has anyone ever heard of or been sued before for million of dollars? Im not looking for theoretical responses- Im looking for real word- has it ever happened? It seems like the LLC is extra protection thats really not necessary but people get scared into going down that path. Would i be naive to not have LLC's and rely on insurance only?