If you own real estate, such as residential rental proper
Tired of Paying Insurance Premiums
For most REI (real estate investors), the cost of insurance is an expense. The majority of business owners use liability insurance coverage to protect their LLC against the unexpected liability of an accident. Insurance companies are in the business of accepting risks and have experience in litigation.
Although insurance is not exactly cheap, it’s far more cost-effective than nearly any other form of protection. The strategy of not carrying insurance doesn’t make sense in our opinion. While insurance premiums go directly against the bottom line, coverage is far less expensive than one slip and fall claim.
If you’re thinking you might stop buying insurance for liability and using an LLC to shield the consequences – D
A Properly Set Up LLC Needs Insurance
Although an LLC can protect your personal assets if properly set up and maintained, an LLC is not a substitute for liability coverage. Insurance policies tend to provide you and your LLC with an attorney if a liability claim springs up. The cost of this defense with a paid attorney is more than worth the cost of the premiums you pay.
Know What Your Policy Covers
One mistake REIs make is assuming that because the LLC pays premiums for insurance that there is coverage. Unfortunately, that’s not always the case!
Our legal background has
In our insurance law blog, we discussed a legal decision from the Oklahoma Supreme Court. This case is the prime example of a real estate owner that thought there was insurance when none existed.
What about you?
What would your LLC do with a serious liability claim and no insurance? Would your company survive? The question of insurance coverage should be explored before a claim, not after.
In the Siloam Springs Hotel case, a motel had an indoor pool. The
While the case involved a hotel, the point remains the same. If you find out there’s not insurance after an accident, it can be disastrous. Residential rental property owners need to understand their liability coverage to properly manage the risks of the LLC.
Steven V. Buckman is an Oklahoma attorney helping business owners with legal advice, LLCs, and insurance matters. He helps REIs and property owners with LLC set-ups, maintenance, and LLC liability issues.