Is this the right insurance setup?

[Kevin Smith]

I have a question about insurance. I've recently changed how my rentals business is structured, and I'm trying to ensure I have the proper insurance coverage. 

I have one LLC that manages all of our properties (but owns none), and then I have our properties which are owned in various LLCs and even some in our personal names (I know, I need to get those into LLCs). The change for us is the new property management LLC. The properties all have their respective landlord insurance policies.

My question is this - what type of insurance is right for the property management LLC? I've spoken to a couple of my insurance brokers and they've had various ideas - the best of which is excess liability coverage on the landlord policies. However, my thought is that the management company would need a general liability policy or something of that nature.

What is the right way to go?

Thanks for your help,

Kevin   

[Greg Scott]

Your biggest outstanding exposure is probably you.  If you run over a bunch of people with your car, all your assets are at risk.   I would look at getting a personal liability umbrella which is typically written off your homeowners policy.

I used to get $500k liability on my single-family rentals plus had a $2M umbrella which covered not only liability from my properties but also protected my properties from me.  I slept well at night even though I stopped using holding LLCs.  FWIW umbrella policies are fairly inexpensive.

It is worth noting that 50% of LLCs have the corporate veil pierced (according to a podcast I recently heard with Garret Lynch). Having lots of LLCs can be a pain, and if having all those LLCs causes you to miss any of the corporate formalities, you may as well not have had that LLC.