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I have a lake house that I own with my 4 siblings and I rent it out when it is not in use. We just opened an LLC to protect our personal assets and for many other reasons. My property is next to the boat launch and we have noticed people have been using our dock, fishing from our beach front, docking their boats and jet skis on our beach front etc. I brought this to the towns attention and stressed that it was a safety and liablity issue. They are working with me to put up buoys, extend the fence, post no trespassing signs, etc. but if someone is hurt on my property, the liablity will fall on us.
I called my insurance company to get a umbrella policy just so we are covered. They told us that it has to be attached to either mine or one of my siblings homes or they won't do it. The whole purpose of the LLC was to prevent this. Can I get an umbrella policy for a house under an LLC without it being attached to my personal assets? Does anyone have any other suggestions on how to handle this without spending a fortune?
Our agent (State Farm) advised against trying to use our personal umbrella against our LLC property (even though the property is in our name, not the LLC's). The argument was pretty straight forward - the minimum liabilty coverage was $250K, and our umbrella could have covered us to $1 million. BUT, the cost to upgrade the policy with the LLC from $250K to a 1 dash 2 million policy was just an extra $75 a year. Now we're fully covered up to $1M per incident, $2M per year without intermingling our personal and business coverage.
Can you provide more information on the LLC policy? I do not currently have an LLC, but if the property is in your name and not the LLC's, can you explain how you were able to get a policy on the property with the LLC and what the policy covers? Thank you.
Although it is an LLC, they look at it the same way they look at a Sole Proprietorship. The coverage actually covers us personally, not really the LLC - the LLC only provides an extra veil of protection if we didn't have insurance or for things that insurance doesn't cover.
I feel confident that our coverage is valid, since it's not only through a major underwriter (State Farm), but also issued by our local agent. Our area is's economy is almost 50% tourism related, with many, many vacation rental homes, so the coverage has been validated with approved claims by other homeowners many, many times.
Let me see if I understand. You have an insurance policy with State Farm on your vacation rental property for fire, theft, liability, etc. You pay $75 extra/year to increase the liability coverage from $250k to $1mil/$2mil and no umbrella policy is involved on the vacation rental policy?
They couldn't use our personal umbrella for the business coverage (they are even different underwriters within State Farm), but the cost to increase the liability coverage on the business contract was quite small anyway. (I might be wrong on the $75, it might have been a $125 difference) There is no umbrella on the business policy.
In fact, we now have 2 rental houses, and they said they couldn't offer a single umbrella that would cover both; each one had to stand alone. So I guess with two properties I'm paying an extra $150, or $250 (since I can't remember whether the difference on each was $75 or $125).
@dbmeyer- The property for my LLC is going to be in the compay name not mine or my siblings personal names. We will be all be listed as owners of the house. The property was in a living Trust and we had to change it because my mother passed away many years ago.
I called my insurance company and told them we changed it to an LLC and they just switched it to the LLC and gave me the same home owners coverage as I previously had. When I asked for an umbrella policy, they told me I had to put it on my home owners coverage on my own personal home to cover my "second home". I do not want to attach this house to any of my personal property. It sounds like I may just need to get more liablity coverage instead of an umbrella policy.
@jbarbara321: Make sure the insurance policy is a rental home policy designed for short term rentals (with coverage for furnishings). A regular home rental policy, designed for renting your house to tenants on a monthly / annual basis might not be considered valid if you need to make a claim.
Ours is actually through State Farm's hotelling underwriter because the rentals are less than 30 days.
Thanks to both of you for your information on insurance for vacation rental LLCs. Any other tips for setting up the LLC would be appreciated. I've set up LLCs for consulting businesses but not yet for my vacation rentals.
Getting rental insurance was a entirely different issue...and boy was it an issue! I had a hell of a time finding anyone that would be willing to give it to me. We don't rent this house a lot so I was able to get a rider that covered renting it out for up to 6 weeks. Anything more than that, no one wanted to touch it because we also use the house.
Sounds like your situation is unique, and that the agent understood it properly, giving you the right kind of insurance.
The hard part is how much this differs state to state, so what works on one side of the state line doesn't work on the other.