December 10, 2019
What’s Landlord Umbrella Insurance & Why You Might Need It
Landlords typically carry a variety of insurance policies to keep themselves, their business and their tenants safe, but one of the most frequently overlooked types of insurance is umbrella insurance. Here’s a guide to what it is and why you might need it.
What is Umbrella Insurance?
Umbrella insurance is insurance that may provide protection beyond existing limits and coverages of other basic policies. It provides an additional layer of security for landlords who own many assets or who may be sued by tenants or other people visiting the property.
Why Do I Need It?
If a tenant sued you and won, can you afford to pay them $100,000? What about $500,000? Or even more! Most of us don’t have that kind of cash lying around. Umbrella insurance is designed to protect you, and all of your assets, as a landlord.
What Does Umbrella Insurance Cover?
Quite broadly, it covers four main things: bodily injury, personal injury, property damage and landlord liability. When you purchase umbrella insurance, the policy offers protection against being sued for damages to other people’s property, vandalism or body injuries claims. It also covers legal fees in the event of libel, slander, and invasion of privacy claims.
What’s an Example of Umbrella Insurance in Action?
As a landlord, it’s easy to encounter a number of situations that may result in a lawsuit. For example, let’s say one of your tenants fell down the outside stairs and broke their arm at your rental property. If they held you responsible for their injuries, they could take you to court. Now image that your tenant can no longer make their living as a copywriter and also sues for lost income. That could start to add up.
Or, perhaps you rejected an application, but the potential tenant believes it is because of racial discrimination and sues you.
Why Is Umbrella Insurance Important?
Without insurance, a large award against you could be financially devastating and force you to sell assets. Everything from your car, your house and your investments can be up for grabs. Even future income could be considered a financial asset. Landlords and property owners typically buy umbrella insurance to protect against financial ruin.
How Much Coverage Do I Need?
According to the Insurance Information Institute, “For about $150 to $300 per year you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that.”
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