Friday, September 7, 2012

More on Insurance Home Work

As I previously posted, Mr. Sam and I are working on obtaining term life insurance, we met with our insurance agent last night and completed the life insurance application for each of us.  We have settled on $1 million in life insurance for each of us for a term of 20 years.

We also are exploring  umbrella insurance.  An umbrella insurance policy provides broad and additional insurance above and beyond home owner and car insurance.  Because we have three rental properties and an additional property (just land) and because our net worth has now hit the $1 million mark (and has held there for a few months) an umbrella insurance policy makes sense for us.  We don't have control over four properties that we own from day to day, the three rental properties obviously involve people who may or may not hurt themselves or invite people onto our properties that might hurt themselves.

Step one of obtaining an umbrella policy is to increase our car insurance coverage.  Luckily, increasing our coverage and combining our previously separate policies, as a married couple, will decrease our overall car insurance costs.  The umbrella policy we are looking at requires underlying $250,000 bodily injury per person and $500,000 per accident coverage which is normal for umbrella coverage, so we are increasing our coverage.

Step two of obtaining an umbrella policy is to increase our liability coverage on each real property (and/or determine that we have sufficient liability coverage).  The umbrella policy we are looking at requires underlying $300,000 liability coverage for each home and property we own.  At present, we have determined that one of our homes has sufficient coverage, the other three homes covered by Florida's Citizens Property (the state run insurance organization) most likely do not because Citizens has reduced liability coverage across the board.  But, we need to check.  To the extent our Citizens' insurance policies do not provide sufficient coverage we will need to purchase gap insurance to provide the additional $200,000 in liability coverage which will run $200 per year per property (so probably $600).  We also have property up north which is undeveloped, and, as such, it never crossed my mind that we should have an insurance policy on it.  But, of course there is a chance that someone could enter our property, get hurt and sue which is why a liability policy is required on that property before we can get an umbrella policy.  So I've called an insurance agent up north to see how much a liability policy will cost, hoping its cheap as the risk seems quite low.


Anonymous said...

We bought an umbrella policy right after our first rental for the same reasons you mention and because at the time we had a German Shepard and felt the extra liability coverage was a good investment. Question, have you put your rentals in LLC's? We have not but have had interesting advice. Our attorney recommends it for the protection but our insurance agent questions the logic and expense because we have the umbrella for that protection.

Sam said...

Good point and question Anon. One of the reasons we are seeking an umbrella policy is because our rental properties are held in our individual names and not an LLC.

If I had it to do over, I probably would have started off holding our rental properties in an LLC, but because we have owned them individually for so many years, we would lose our tax benefits if we, now, transferred them to a LLC. However, this is an issue that we need to further research and understand.

Anonymous said...

We have umbrella insurance too. It is surprisingly cheap, but it is crazy how much other insurance we have before it kicks in.