Do you have enough liability insurance? Probably not. But how much is enough? Unfortunately that question varies. First, what does liability insurance do? Liability insurance does two things: (1.) it pays for losses for which you become legally liable for as a result of a lawsuit and (2.) it pays to defend you in the event of a lawsuit.
So what can you become legally liable for? As a real estate investor you have some unique exposures. You have tenants, and, let’s face it, they probably don’t love you. Not because you’re a bad person, but because you represent a bill, and maybe a past due bill. You’re the proverbial “man” they are trying to stick it to. So you need to protect yourself, your assets, your business.
“It won’t happen to me.” Try this. Google how to sue your landlord and feast your eyes on the three million, yes, three million results.
The bottom-line is that if you get sued and are found liable you will be required to pay the judgment. How? That depends. If you have insurance, that would be first, then it goes to your assets, including cash, stocks, bonds, REAL ESTATE. Yes, you selling that investment property might do real well to pay off your judgment, and you’re out the asset and the cash flow. Beyond that, your wages from your J-O-B can be garnished. Liability is a serious thing.
Liability insurance isn’t expensive, it’s actually quite reasonable. So max out the limits on your policy, the marginal difference will be dollars. Then, consider an umbrella policy. An umbrella policy is a liability-only policy with some unique features which are pretty cool, but the important part is that it kicks in when you get sued for limits that are higher than a home insurance policy. For the limits you get, it is amazingly affordable. And if you have several investment properties you may have several million in real estate. Protect your investment(s) by making sure you have enough liability insurance!
Get covered today with an umbrella policy today! Start your quote immediately, but have what you need on hand!