helloworld
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I've got a question about structuring an insurance strategy for a two-level real estate (residential property rental) company to achieve the broadest possible liability protection while avoiding redundant or unnecessary coverages. The company has two levels: a "parent" LLC which serves as a holding company for several (roughly ten) "child" LLCs which each hold exactly one rental property. The parent LLC is owned by two individuals (50% each). Since the properties are geographically distributed, the chances of a catastrophic event hitting many places in the same year is tiny. I believe that if a law suit occurred, the child LLC would be the responsible party, but I'm concerned that since most of the cash is held by the parent and has the relationship with the management company, it could be held liable for a lawsuit. Similarly, the other owner of the parent LLC and I are concerned that we may be personally be sued if negligence is show and/or the corporate veil is pierce (i.e. potentially because we personally are the guarantors, not the LLC, on the mortgage since these are FNMA loans). We'd like relatively high liability coverage of around $5M to protect our assets as well.
I'm interested in finding out how other people that have similar concerns about liability have structured their insurance policies. I have the following three proposals to kick off the conversation. Please poke holes in these strategies, give me your comments about which is the best, or propose better alternatives.
Proposal 1 (Several Landlord/Commercial Policies + One Umbrella): Under this arrangement, each child LLC would have a separate landlord or commercial policy covering the property in question. The named insureds on this policy would be the parent LLC, child LLC holding the property, and two individual owners of the parent LLC. The liability limits on each of these policies would be whatever is the required minimum for an umbrella. In addition to this, there would be a single umbrella policy with a high liability limit that covers the parent LLC, ALL child LLCs, and two individual owners of the parent LLC. I'm not sure if it's possible to have this many named insured (roughly a dozen) on a policy. My reason for proposing a single umbrella policy is because I assume this would be cheaper than having a seperate umbrella policy for each LLC, but maybe this isn't the case?
Proposal 2 (One Landlord/Commercial Policy + One Umbrella): This setup would be similar to what I described aboved, except there would only be two policies: the same umbrella policy as I mentioned above and a shared landlord or commercial policy where the parent LLC, child LLC holding the property, and two individual owners of the parent LLC are named insureds. Potentially having such a shared policy would be less expensive than proposal 1, but I'm not sure if such a policy is even possible to create.
Proposal 3 (Several Landlord/Commercial Policies + Several Umbrella Policies): This would work as it sounds, and my inituition is that this would be more expensive than the above alternatives since it requires many small, individual policies.
In addition to the above requirements, one nice-to-have in our insurance strategy would be for us to be able to use the coverage for any potential personal liability not related to the parent company. For example, if I'm at fault for a terrible automobile accident on a non-business-related trip, I'd like for the umbrella policy to kick in. This save nice-to-have because this would save us a small amount from having to create additional personal umbrella coverages.
We're working with insurance agents as well on this issue and to get policy coverage specifics, but we're concerned about their potential bias towards selling excessive coverage or downplaying coverage gaps. Perhaps some of you can give a less biased solution to our needs?
I'm interested in finding out how other people that have similar concerns about liability have structured their insurance policies. I have the following three proposals to kick off the conversation. Please poke holes in these strategies, give me your comments about which is the best, or propose better alternatives.
Proposal 1 (Several Landlord/Commercial Policies + One Umbrella): Under this arrangement, each child LLC would have a separate landlord or commercial policy covering the property in question. The named insureds on this policy would be the parent LLC, child LLC holding the property, and two individual owners of the parent LLC. The liability limits on each of these policies would be whatever is the required minimum for an umbrella. In addition to this, there would be a single umbrella policy with a high liability limit that covers the parent LLC, ALL child LLCs, and two individual owners of the parent LLC. I'm not sure if it's possible to have this many named insured (roughly a dozen) on a policy. My reason for proposing a single umbrella policy is because I assume this would be cheaper than having a seperate umbrella policy for each LLC, but maybe this isn't the case?
Proposal 2 (One Landlord/Commercial Policy + One Umbrella): This setup would be similar to what I described aboved, except there would only be two policies: the same umbrella policy as I mentioned above and a shared landlord or commercial policy where the parent LLC, child LLC holding the property, and two individual owners of the parent LLC are named insureds. Potentially having such a shared policy would be less expensive than proposal 1, but I'm not sure if such a policy is even possible to create.
Proposal 3 (Several Landlord/Commercial Policies + Several Umbrella Policies): This would work as it sounds, and my inituition is that this would be more expensive than the above alternatives since it requires many small, individual policies.
In addition to the above requirements, one nice-to-have in our insurance strategy would be for us to be able to use the coverage for any potential personal liability not related to the parent company. For example, if I'm at fault for a terrible automobile accident on a non-business-related trip, I'd like for the umbrella policy to kick in. This save nice-to-have because this would save us a small amount from having to create additional personal umbrella coverages.
We're working with insurance agents as well on this issue and to get policy coverage specifics, but we're concerned about their potential bias towards selling excessive coverage or downplaying coverage gaps. Perhaps some of you can give a less biased solution to our needs?
