How much liability coverage do you have/suggest?

Question

Right now I have no liability insurance on any properties. All are owned free and clear so I don't have to have insurance but I'm worried that a tenant will slip and fall in the tub and sue me. I have fire on a single fam home (only $200/yr) and just the master HOA insurance policy on 3 condo units.

Is liability coverage of $100,000 per occurance enough? $300,000? Do I need to get a $1m umbrella?

FYI--In order to get any liability insurance, I must ensure one condo for property damage ($350/yr) and then I can add liability on dwellings rented to others for about $25/yr for each unit. Also, it seems stupid that the condo interior costs more than fire on a single fam. dwelling. And they require having my auto policies as well, which is at a higher rate than my current carrier.

Brian Levredge · Answer

Insurance is obviously a risk assessment. If you own property free and clear in CA, then you have a lot to lose. Not only is there tenant liability, but there is outside liability as well. What if someone cuts you off while driving and you cause a car accident (even though someone else is at fault)? Any decent attorney is going to run an asset search on you and quickly see that you have some valuable real estate that will cover damages above and beyond your auto policy. There are any number of possibilities that could happen to for which you could be held liable, even though you didn't do anything. Just because you've been lucky enough to avoid anything so far, doesn't mean you will in the future though. I carry 1M in liability in a landlord policy that also covers fire, and loss of use. In addition, I carry 500k in liability on my auto and another 1M umbrella that covers me anywhere in the world.

Steve Babiak · Answer

Your dollar amounts will depend on your overall financial picture; if you have nothing to lose, you can insure exactly as you are now doing. For liability, you also need to worry about the pedestrian passing by and having a slip and fall on your property, plus other scenarios once you begin to explore what your liabilities are here. The need for placing auto with the same carrier usually only comes up when you are talking about an umbrella, since the umbrella policy extends liability coverage over everything. Time for you to talk to several agents and don't forget to talk with independent agents too. Several BP threads on insurance already, so search and you might get names of companies that others use.

Shari Posey · Answer

Actually, when I look at our bank account I think I don't have much to lose but you're right, with properties we do have a lot to lose. Good point. I think I'll go for the $1m umbrella--it all ends up being about $1000/yr for all properties.

Account Closed · Answer

Shari, if your aim is to reduce liability, you may want to consider putting your properties in an LLC or multiple LLC's. This could get expensive in Cali, but may be a decent option for your out of state properties.

Bill Gulley · Answer

The holding company, 5M general liability, but that's a secret! Just a note...never tell anyone, especially a tenant, what your limits of liability are! IMO, 1M is plenty, unless you have more to lose. Think about things like gas explosions, not trip and falls from some poor tenant who has a limited financial perpensity.

Shari Posey · Answer

Oh, man, forget about LLCs for each of these properties. From my quick half-hour research on the internet, an LLC is treated like a corporation in CA and it can get really expensive with $800 per year per unit to the state plus seperate accounting costs at another $500-plus per year per unit, and then insurance, too. I think an umbrella is the way to go.

Account Closed · Answer

Please forgive the lack of punctuation and rambling of my above post. It's late where I am :)

Account Closed · Answer

Shari, I would start an LLC or Corporation tomorrow. I know there is a cost involved in doing it but It will be worth it if there is every an issue. I do not know much about California law but, if a person is hurt on your property and you are not a corporation or LLC and thy deiced to sue you not only are you liable but in some states and areas (again not sure of Cal) all of your assets including marital assets can be attacked. This would include any Money for college funds, retirement, ext. After you have set up your LLC or Corporation you should transfer you business properties to that entity. Then the insurance policy will need to be written for the corporation or LLC. Having the policy is a GREAT idea and I know they help me sleep better :)

Marc Freislinger · Answer

Our management company has a $1,000,000 liability umbrella, and the company van has a commercial policy that covers up to $20,000 in tools. You might want to shop around though, your quote seems a bit high on the umbrella.

Shari Posey · Answer

I thought about a few years ago but as I recall it's about $1000 per property just to set it up. Honestly, I don't know that much about it so any CA landlords can advise.