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Business Development

One Big, Fat Insurance Mistake You’re Probably Making

From Rob Swanson, Business Development Advisor…

double facepalmHey real estate investors, flippers, wholesalers, agents and more... I'd bet a big fat juicy steak dinner that you're making this insurance mistake and neither you nor your agent will even think about it until it's far too late.

Here's the set-up...

You're really smart.  You go to your insurance agent and say:

"Hey, I'm a big time real estate investor and I need to protect myself personally against stuff that might happen in my business.  I need an umbrella policy for a million dollars or more.  What do you recommend?"

Ok, you're on the right track and, come to find out, that million dollars worth of coverage is a whole lot cheaper than you ever thought it would be. It's a no brainer for sure and you're good to go.  Yep, you plunk down a few hundred bucks and boom, you're covered, protected and life is good.

Well guess what....

There's a reason those personal umbrella policies are so darn cheap.

Wanna know why?

I'll tell you.  It's because most of the time, the things that are going to happen that you would like to use the umbrella for end up in the "non-coverage" fine print, and even though you were smart enough to think about and buy the coverage up front, you'll never get to actually use it. 

Your claim will be denied and there's rarely a payout.  And that, young grasshopper, is why those umbrella policies are so darn cheap.

But you're thinking, "How on earth can they deny the claim?!", right?

Here's the mistake...

You buy "a personal" umbrella policy, and then you have a "business event" that creates the claim.  Denied.

Let me explain.

Let's assume you have your million dollar personal umbrella policy (the cover-me-all-plan) and then someone slips, falls and sues at one of your houses.  You did it all right and even bought the house in your LLC.  Good job. 

The problem is that your LLC is not covered under your "personal" umbrella policy, and you probably didn't even think about buying an umbrella policy specifically for the LLC did you? 

Probably not.  And, your insurance agent probably didn't think to suggest it either (hopefully they did).

I'm no lawyer, so I don't even know what they'd sue you for (and I'm sure not giving you any advice here on how to protect yourself).

But, if there's a lawsuit, everyone and anyone, corporate and personal in any way associated with the property is going to get named in the suit.  Including you. That's one of the first rules of asset protection 101 - understanding that when it comes down to it, whoever's after you will go after you in every way and from every angle possible.

At first you think.  No big deal, you're covered and you're umbrella policy will kick in.  Right?  Wrong.

This is a "business event" 

And unfortunately, you're personal policy will most likely not offer coverage for you personally to insure against a business claim. 

This is huge and something you need to talk to your insurance agent about.


Do It To It! Immediate Action Steps
  • Reassess your current liability insurance coverage right now. 
  • Make sure you are getting coverage both personally AND corporately.
  • Go call your agent today and start talking about this stuff.  You'll be glad you did.
  • Be smart enough to understand the difference I've presented here or you'll find that your insurance planning might not work as well as you hope.

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