Covering my Assets

I have noticed a few topics about the liability insurance and umbrella policies that you guys carry, but what doe these mean? I guess I am totally ignorant.

On all of my properties I have the basic insurance (an insurance agent said it is what I needed for rental properties), but it sounds like I need more. I only pay about $400 / yr in premium for each house. Can you help me make heads of what I need?


Umbrella insurance is an additional layer of insurance beyond what you have for your properties and automobiles. Think of how an umbrella would cover a few people.

My opinion is to have an insurance to cover your net worth.

I recently had a discussion with my insurance guy about getting an umbrella policy and one thing that I learned is that my company (American FAmily) requires you to have your current policy coverages set at certain dollar levels before they’ll let you take out an umbrella policy. Just a heads up that you might have to incur additional premiums on your current policies (if youre forced to raise your coverage), as well as the cost of the new umbrella policy.

On all your rental dwelling policies, you have hazard insurance and maybe a minimum liability rider. If you get sued, it is your liability coverage that will pay any judgments that may be awarded.

If the judgment amount exceeds your insurance policy limits, then you may have to sell some or all of your assets to pay the judgment. This is where an umbrella liability policy comes in. An umbrella policy picks up where your basic insurance policy stops. If you have more than one rental property, then your umbrella liability policy will extend the liaiblity protection that each of your basic policies provides.

To get an umbrella policy, the carrier may require that you have your basic home and auto policies with them as well, and that the minimum liability coverage for each of your basic policies is a certain minimum amount.


Sit down and read your rental insurance policy through. There can be nasty surprises in there. Recently our insurance went up and also they QUIT covering roofs for hail or wind damage. This was because there were lots of roof claims after a disastrous hail-storm.

Now you should have a list of questions for your insurance person: “What happens if the neighbor’s tree falls on my rental?”
“What happens if my tenant slips on ice and breaks her hip?”
“What happens if there is a grease kitchen fire?”

All of the above could easily happen! You need to know how this will affect you. Ask those questions–have a sit-down with your insurance agent. For our rental houses, we have $500,000 liability coverage on each.

As you get more assets, you need more coverage. Like some other owners, we have a personal umbrella coverage–costs about $450/year for 2 million dollars coverage. Because we have a furnished rental house business we have yet another umbrella policy for lawsuits that would exceed the $500,000 basic coverage. With all this in place there is less worry.