LLC structure and insurance question

[Charles Kang]

Hi all,

I am a newbie real estate investor and I have been trying to educate myself on investing in turnkey SFHs in preparation for starting to purchase my first property out of state (I live in CA) this year. My goal is to purchase the first few properties in Huntsville/Montgomery/Birmingham Alabama, and possibly diversify to one other state after the first 5 properties. I've been doing a lot of research on setting up an LLC structure to hold the properties for personal asset and privacy protection. I think I've settled on an LLC structure to meet our needs but I'm not sure about the insurance portion.

We will be transferring the title to the properties into an LLC in Alabama after we purchase them in our name. Do most insurance companies provide landlord property/liability insurance and umbrella policies for properties owned by an LLC? If so, do the policies cover both the LLC and us personally? I'm not sure how the insurance coverage works when the property is held in an LLC, especially since the LLC structure I am thinking of would be essentially two-tiered, with one "master" holding LLC in Wyoming owning the separate LLCs in Alabama which will hold title to the properties and collect rents (through professional property management company which would collect the rents from tenants and pay the AL LLC). So technically we personally would not "own" the properties directly, but would only directly own the Wyoming LLC which then owns the AL LLCs holding title to the properties and collecting the rents. The AL LLCs would then distribute the funds to the WY LLC, which would then distribute funds to us personally. So we would be members/managers of the WY LLC and the WY LLC would be the member/manager of the AL LLCs and our names would not be on the AL LLCs. I hope that makes sense, since every time I think about it, I still get somewhat confused myself.... Not even sure this is the correct LLC structure but it seemed to make sense when I heard and read about this strategy.

Does anyone on this forum also have rental properties held this way, and if so, how does the insurance coverage work? Is only the LLC named as the insured, or do we also need to have our own names on the policy?  Can the AL LLC be the primary insured name, with WY LLC and our personal names added as "additional insured"?  I guess we could put our names on the AL LLCs as one of the members or managers, but it seems like that might partially defeat the purpose of forming the LLC structure this way (i.e., privacy protection by not having our names on the AL LLC).   Also, any recommendations on attorneys or entity formation companies that can help set up the LLC structure?  Thanks in advance for any info on this!