LLC Named as "Additional Insured" on insurance polity

[Jim Breedlove]

During 2015, I set up a Texas Series LLC to hold my 8 single family home rental properties. My attorney filed deeds to transfer the properties out of my name - into the name of the individual series within my LLC. Rather than cancelling the insurance policies in my personal name, my insurance agent suggested that I simply keep the policies in my name but name the LLC as an "Additional Insured" on the policies. Apparently, this is how her investor clients handle insurance.

I'm wondering if this is an acceptable approach, or should I cancel my current policies (with the LLC named as an additional insured), and get insurance in the name of the LLC. Of course, my goal is to maintain the integrity of my asset protection plan.

Has anyone considered this issue?

[Tommy Brown]

This thread may be dead now, but I will be adding this for anyone who stumble across this forum.

The "Named Insured" on the rental property should be the same name as on the title. In the above instances, the property should be insured under the name of the LLC. Some personal lines insuring carriers will offer this product, but not all are willing to write a policy this way.

Additionally, a commercial insurance policy is a great way to go for higher limits of liability and often broader coverage options included coverage for newly acquired buildings before the insurance has been set-up (particularly good for property investors with large portfolios who do not always contact their insurance provider quickly). Multiple LLC's or Corp's with 51% or greater common ownership can also be added in most instances, naming the additional entities as "Additional Named Insured" to the policy. This provides the same level of coverage as being a "Named Insured."

Insuring the property under your personal name and adding the LLC as an "Additional Insured" is the easy "fix" that agents use, but it provides narrower coverage than when listed as the "Named Insured." The limitation is that in order for liability coverage to be triggered or potentially even defense from your insurance company, BOTH your personal name and LLC would need to be named in a lawsuit.

My advice is to find an insurance professional in your area who understands the needs of property investors and the differences between a "Named Insured" and "Additional Insured." There is no sense in leaving oneself open to such a potential disastrous lawsuit without coverage which could have been remedied with a correctly written insurance policy.