If the insured driver was sued for more than their car insurance covered, the accident must have involved negligence.

These policies also cover you in all other areas of life like car accidents as well.

We have an insurance policy on the rental house (through State Farm), that includes a personal liability section, which is essentially equal to our current net worth.Given that a tenant could sue for more than this if an accident occurred, we are thinking about adding either LLC or an umbrella policy (or both) as extra protection.Any advice on which way to go, and if LLC, any recommendations for a law firm or company the Indianapolis area?

The tenant understands that the property of the Tenant is not insured by the landlord for damage or loss of any kind (action of third party, fire, water, theft, vandalism, storm, heat or cold, electrical damage, pests, mold, accident, etc.), and the Landlord assumes no liability for such loss.

What are the biggest challenges people have faced with this. Also how do I make sure to get good tenants?

When that same accident happens 6 times in a year it would start to look a little less "accidental".

A mass shooting occurred tonight on the street next to the street where the property is located, leaving nine people shot and one dead.

Quote from @Kar Sun: This isn't right.The tenant should have liability insurance, which protects against accidents like a kitchen fire, a slip-and-fall, etc.

They like extra room to avoid accidents, etc....Just my $0.02....

Even if you make all of your payments on time there are times when something happens by accident or a collection pops-up and drops the credit scores.