Our primary asset protection is that we have a $10M umbrella policy. 

Have proper policies for each property and a proper personal umbrella policy layered over the top covering your investment properties. 

It's called something else that I can't recall at the moment, but they'll know and be able to guide you in the right direction.Since there is a large amount of equity in the rental home, just be sure that your new HOI policy has good coverage and possibly think about an Umbrella Policy or additional insurance coverage to "protect you" vs. trying to reinvent the wheel and forming an LLC just for the one property.SD

*No need to mention to me umbrella policies.

People often confuse hard money, NonQM, bridge, fix and flip, PML and other forms of lending as one umbrella of PML. 

An umbrella insurance policy is much cheaper and far less complicated.2.

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

Also, would I need an umbrella policy if I go with commercial grade policy?  

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

A better idea would be to get a stable of solid rental properties under your umbrella and use the profits if you like to run your recovery home.