I currently own some 4-plexes. I have liability insurance on all the units, but my question is do I still need the liability insurance, if the properties are titled in a limited partnership within an LLC?
Thanks,
Pat21
I am not an attorney.
I would think you would want all the liability insurance you can get. Personal liability still attaches to the general partner in a limited partnership.
If the business entity is sued, then all the assets held by the entity are at risk. Your insurance company will defend the entity in the event of a lawsuit, and pay any judgements awarded (up to the coverage limit) if the lawsuit is successful.
Since you have hazard insurance on the property anyway, a liability rider is relatively inexpensive.
In the absence of insurance, it may be very costly to defend against a lawsuit and even if you are successful, you may end up having to liquidate assets to pay your legal fees. Better to have insurance in place.
You ABSOLUTELY need liability insurance, even if the properties are in an LP or LLC. Judges will ignore an entity that is underfunded - and lack of insurance STRONGLY indicates underfunding. Also, an LP or LLC doesn’t mean plaintiffs will simply run in terror. Insurance lawyers will often defend you, which saves you all or some of the very significant cost of funding a defense yourself.
John Hyre
Pat,
Dave T is absolutely correct, the premium you pay for liability INCLUDES defense costs for any litigation. If your 4-plex policy costs you $1,000, probably $650 is for the fire portion and $350 for liability…pretty cheap insurance against those “frivolous” lawsuits!