The umbrella policy: the cheapest thing on a growing portfolio

Every landlord policy has a liability limit, and on a single rental it is often set at a number chosen years ago and never revisited. A serious injury claim can exceed it without difficulty, and what sits above the limit is the owner's other assets. An umbrella policy sits on top of the underlying policies and extends liability coverage across all of them. Relative to what it covers it is inexpensive, and the reason is actuarial: claims that pierce the primary limits are rare. Rare is not never, and the whole point of insurance is the rare case. Three conditions decide whether it works when it is needed. The underlying policies have to carry the minimum limits the umbrella requires — a gap between the primary limit and where the umbrella attaches is a hole the owner funds personally. Every property has to be scheduled on it; an umbrella that lists four of six properties covers four. And the named insured has to match who actually owns each property: policies written in a personal name over properties held in an entity, or the reverse, are a recurring and expensive mismatch. This sits alongside entity structure rather than replacing it. Entities isolate; insurance pays. A portfolio relying only on entities has a liability wall and no money behind it; one relying only on insurance has money up to a limit and nothing past it. Review the schedule every time a property is added. The gap is almost always the property bought most recently. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com