As a real estate investor, you want to make sure you are protected from liability. However, you may be wondering whether an umbrella insurance policy or limited liability company (LLC) structure is the right choice for you.

First, you need to understand what the two entities offer and how they work. In some cases, you could need both. In others, you may be fine with one or the other. When I help my clients with asset protection, I look at the size of their portfolios, their levels of exposure, and their goals.

You don’t need an elaborate plan if you have no plans for growth and almost no exposure. Identify the real risks you face. Then you can make the right decision and move forward with confidence. To that end, let’s look at umbrella policies and LLCs and their implications for real estate investors.

What Is an Umbrella Insurance Policy?
An umbrella insurance policy provides coverage above and beyond the typical property insurance. It can help you cover the cost of substantial claims.

Most small business owners pay between $500 and $1,500 a year for umbrella liability insurance. Many policies have $1 million of per-occurrence limits, but that depends on your claims history and on the type of property you own. Umbrella policies are usually paid monthly.

It’s important to understand that an umbrella policy doesn’t cover any additional risk or liability areas. Let’s say your LLC owns an apartment building and a tenant makes a claim for damages that resulted from a failed repair job.

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