Insurance Advice: $1MIL Liability Coverage - Do I need an Umbrella Policy?

Question

Hi all, need a little advice on Umbrella Coverage.

Right now I'm buying&holding residential properties(1-4) that are under $100k appraised value. I don't plan on using an LLC yet so I can make financing into conforming loans easier and less hassle until I max out my 10 loans.

I've read posts where most people mention getting liability coverage of around $300k to $500k and then supplementing it with a $1million or maybe $2million dollar umbrella policy on top of that.

The insurance co. I use now and will use for my other properties has a minimum liability coverage of $1million each occurrence/$2million aggregate. Do you think I need to get an Umbrella coverage on top of that(Is $1million enough?)

Some other info on my situation: 
My Primary residence just appraised at $540k and I have a $385k mortgage and a $100k HELOC(free money! well almost!). Homeowners insurance has $500k liability coverage for each person.
My Auto insurance policy has a $500k liability coverage each person.

Some other questions/things I'm wondering
If I bought a $2million dollar umbrella policy, would it kick in after the first $500k on my homeowners/auto insurance AND/or the $1million on my landlord policies?
I've read about some people running into issues with getting umbrella policies when they own more than a few rentals, I guess insurance companies are worried about more liability. Does anyone have any experience with this?

Joe Bertolino · Answer

There are at least two carriers that will write an umbrella policy over other carriers.  USLI and Personalumbrella.com will write up to 30 units and will include LLC's and Trusts as an named or additional insured.

If your properties are in CA,  you should get a quote from an agent appointed with CIG.  Their property rates are exceptional and their umbrella is $135-170 per million.

Mehran K. · Answer

Thank you Tim. I appreciate your sage advice on the subject.

Tim Norris · Answer

Hey Mehran!

As it relates to asset protection strategies, think of the work you do with a legal adviser who, upon considering factors such as net worth, estate planning issues and taxation will offer advice regarding entity and ownership issues.  I believe this is your "castle walls and moat" around you/yours.  Think of the liability insurance as the "archer in the watchtower".  The entities you create (LLCs, trusts, etc...), work symbiotically with the insurance coverage.   How much is enough?  Who really knows, but keep in mind that your "personal exposures", such as your vehicles, home, etc...(assuming you haven't exorcised ownership via trust, etc...), are/should be segregated from your business exposures.

All that stated, I carry $500k on our personal vehicles and personal liability (homeowner), and $3MM in a "personal" umbrella.  Frankly, the umbrella, at $230/year is worth it at that limit.  We (partner) carry $1MM over the properties we own via LLC.  No "business" umbrella.  Are these limits sufficient?  Again, who knows, but they are in my mind, at least.  Statistically they are, as most liability claims are under these amounts.

Really, your asset protection strategy should start with a versed attorney, include your CPA, and possibly your financial advisor. Figure out how to own/control what you have, then make a call, in your opinion, how much insurance is enough.  Hope this helps!

Tim

Carol D. · Answer

@Tim Norris

Thanks for the advice.  I tried to get an umbrella policy but my primary insurance company would not issue a policy unless I had everything insured by their company.  I do have everything except 1 home.  For some reason they want to charge almost double the rate I currently pay.

Are there companies that would issue an umbrella policy with other insurance companies as the primary insurers?  If so, could you recommend one or two?

(I do have all my policies set at $1 million liability.  And one low cost property is held in an LLC.).

Thanks!
CT

Bruce Kozak · Answer

thank you both for reponding.  i will also research the other threads as you have advised Mehran.

Colleen F. · Answer

We have a stone building we insure for less then replacement cost. We take that approach because there isn't much chance it is coming down completely and the cost is really high on this building to start.

Mehran K. · Answer

@Bruce Kozak Not sure if you have done this yet or not, but there were quite a few conversations about ACV vs RC coverage in the past. Use the search tool on the top right corner of the forum to find them. I remember researching that same topic before.

All my properties are covered with RC coverage as the price really isn't that much higher.

Bruce Kozak · Answer

Any Landlords out there insure their units for less than full replacement cost coverage?  If so, what would be the argument for that approach?

Bruce

Tim Norris · Answer

CT---Joe nailed it.  Thanks, Joe!

Mehran K. · Answer

Figured I would tag Tim Norris since he runs the company I get my insurance from! Hope you don't mind Tim.

Insurance Advice: $1MIL Liability Coverage - Do I need an Umbrella Policy?

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