Home insurance companies ?

[John Lach]

Hello,

We are looking to purchase a SFR in Round Rock area and it will be deeded in the name of the LLC we have setup. Need your help to see if the following quote Im getting is reasonable or are there other agents/insurance companies you will recommend that are best work with SFRs.

Im have an insurance agent who is quoting me $800/yr for the following coverage:

- 200k fire and other perils

- 300k personal liability (Is this even necessary if we are are registering the house in the name of the LLC?)

- 25k medical

- 35k fair rental value

- 20k other structures

- 2000 deductible

are these the right coverage items/values?

am Im missing anything?

Talking with the agent doesnt give me confidence that their group have experience with SFR, so if you have any recommendation I would greatly appreciate.

thank you,

John.

[Jason Bott]

@John Lach You need liability unless you are just going to write checks from the LLC bank account for Slip and fall claims. If you don't pay them, then you just get the equity in the LLC applied towards the claim.

I don't have the right legal terminology, but the idea is the Liability policy is there to protect the LLC.

[Anthony Lee]

@John Lach Without knowing the details of the property/your operations, it is impossible to know if the coverages/values are entirely "right" as it is a questions as to whether it fits your risk tolerance or not. However, the coverage amounts seem rather standard, to some degree, from what you have listed.

Regarding the liability, @Jason Bott is entirely correct. However, depending on your operations and assets, you may want a limit higher than $300k. 

[John Lach]

Thank you very much @Jason Bott @Anthony Lee for your prompt response & suggestions.

Right now we only have 1 SFR but are actively looking to purchase few (1-3) in coming months. Is it advisable to go with $300k for now and increase it as we put more properties into LLC? Or is the best practice to have an equivalent of an umbrella coverage for the LLC ($2-$5million)? Dont know if they provide an umbrella coverage for LLC, you can tell im a NooB.

[Jason Bott]

@John Lach the cost between $300k and $1M is so minimal, you might as well go with $1M.  

With RE, Liability claims are typically bodily injury claims;  someone stating they are hurt and you are at fault.  Everyone knows how high health care is, so think of how little $300,000 really is.  

Say someone trips on your front lawn and states they now have a knee injury that results in 10% partial disabilit for the rest of their lives, 40 years.  The court could rule you owe $10,000 per year for 40 years, or $400,000.

This is not an actual example from my clients, but an example to show how little even $1M in coverage is when considering someone's health care costs.

With just 1 property/unit, I feel $1M is adequate.

[Anthony Lee]

@John Lach I'm a little late with the reply here, i'm glad @Jason Bott was able to elaborate on it for you. 

[John Lach]

@Jason Bott @Anthony Lee thank you very much for all your help.

[Brien OConnor]

Definitely late here, but I'm an insurance agent and somewhat new investor.  No, I don't insure my own home or properties.  I use a buddy who specializes in "personal lines" insurance.

I can assure you, you'll be amazed how inexpensive it will be to go from $300,000 liability to $1,000,000. That's what I would recommend. I each SFR I would have $1M limits. I would have the insurance in the name of the LLC - transferring it through a quit claim deed as soon as you can. I would also recommend buying at least a $1M umbrella in the name of the LLC as well. All of this is not very expensive and you roll it into your escrow.

[Kristopher Hanks]

Great info. Thanks for stepping up and giving us very valuable information.