Unbrella insurance hard to find

[Account Closed]

I was looking for an umbrella policy and have just about given up. After 3 to 4 hours invested I am having no luck.

Always a problem.

Over 10 rentals

Will not write over the current landlord polices

Not available in my state ( Va.)

Will need to change all my current rental policies to a commercial

Any help appreciated

[Ivan Oberon]

Hi Ray,

The problem you are experiencing is not uncommon as you are likely dealing with a "personal lines" company and looking for a "personal umbrella" to cover your income producing "business activities" (your rentals). 

The IRS considers anything which generates income for you a Business activity. It is irrelevant whether you own the property in your personal name, an LLC, Corp or Trust, etc...

The vast majority of insurance people out there do not understand this because the majority of them are not active investors themselves and because of this, provide incorrect information and either inferior products and in many cases, based on my experience, the absolutely incorrect product altogether. This puts their clients and themselves at risk.

Coverage for your rental properties needs to be written on a commercial form, underwritten as a tenant occupied dwelling and at least $1,000,000 in liability. You want to look for the flexibility to not be subject to Co-Insurance requirements or minimum earned premiums and varying choices in deductibles and coverage forms. You also want to be able to switch coverage on the fly between a property being vacant, occupied or under renovation as sometimes you might experience a longer vacancy than expected during a turn or have to do a more major renovation after many years.

Another thing you'll want to look for is a master policy with simple monthly reporting with no minimum earned premiums and no new down payments every time you add a property.

Also, all "personal" policies and "personal umbrella" policies have what is called a "Total Pollution Exclusion." Many commercial policy forms allow you to "buy back" coverage for at least one type of "pollutant" that is pertinent to landlords. This coverage will offer defense and claims settlement for alleged or actual injury caused by CO2 emissions from a heating or air conditioning source.

You can add a "personal umbrella" to cover your personal liability exposures of your home and auto, if your net worth justifies it, but you should keep any income producing assets separate from your personal liabilities.

There are very few companies who understand this and do it right but once you get set up right and realize how much easier it is to manage and scale your business up, you'll be glad you did.

Ivan