In this two‑minute tip, Mark Kohler explains why umbrella insurance is a valuable, affordable layer of protection for anyone, especially owners of rental properties. He clarifies that umbrella policies are excess coverage that only activate after the limits of underlying homeowner or landlord policies are exhausted, and they require those underlying policies to be in force. Kohler warns that personal umbrella policies may not automatically cover rental properties; some limit coverage to a few rentals, while others require a separate commercial umbrella. He stresses the need to balance insurance with legal asset‑protection tools such as LLCs, recommending both legal structures and appropriate insurance to safeguard assets. The video ends with a call to subscribe, follow his newsletter, and explore his tax‑and‑legal video library.
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Hi, Mark Kohler here with a two minute tip talking about umbrella insurance. Now I want to put this in the context of a rental property and I know for some of you in an expensive states where an LLC can be costly, that is California, Illinois, you might be thinking, I'll just buy insurance, I'll be covered. Well, not so fast, tiger. Let's talk about it now. Number one, umbrella insurance makes sense. I think umbrella insurance is a great insurance strategy for everybody. Even if you don't own rental property, it can be extremely affordable and it provides extra protection in case of a claim from somebody that wants to sue you or an accident that could occur. So don't think that I'm saying insurance is bad and that all you need to do is legal protection and avoid insurance. Conversely, anybody out there that's saying just buy insurance and don't do legal, not too wise either. So first and foremost look at umbrella insurance and make sure it's a part of your plan. Number two, let's talk about some realities here. However, umbrella insurance is excess insurance, meaning once your regular insurance is used up, then umbrella steps in. It doesn't cover you in case your regular insurance doesn't do it. It only covers you after your regular insurance runs out of its policy limits. A lot of people think, oh, umbrella insurance will just cover everything. No, no, no, Again, it only steps in for the excess liability. That's why it's so cheap. Number three, related to excess insurance is the fact that you have to have valid insurance in place in the first place or umbrella insurance won't kick in. For example, if you have a homeowner's policy and there's someone that gets hurt at your property, maybe in the swimming pool, and heaven forbid there's a claim that's in excess of your policy limits, then umbrella insurance kicks in. But if you don't have valid homeowners insurance, it won't. Now let's put this in the context of a rental property. You have to have a landlord policy for your rental property and then umbrella insurance will kick in. But if you don't have that landlord policy, watch out. That umbrella policy could be worthless. Number four, keep in mind that most umbrella policies are personal umbrella policies. They cover that uninsured motorist, maybe you have a teenage driver, your homeowners and that sort of thing. Sometimes they don't realize you may have a rental property and you just think your rental properties are going to be covered with your personal umbrella. Be careful. Make sure you talk to your insurance agent before making that assumption. Some umbrella policies won't cover rental properties. Some do. Some only cover up to two to three rental properties. So then you're forced to get a commercial umbrella policy. I personally have a commercial umbrella policy over my rental properties and then I have a personal umbrella over personal liability. And again, they're very affordable because they're excess policies on top of your regular insurance anyway. But again, don't make the assumption that your personal umbrella is going to just cover everything, including your rentals. In sum, again, insurance is an important part of a good asset protection plan as well as legal planning and getting an LLC for your rental properties. It's combination of both. It's balance. So don't avoid LLCs for insurance and don't avoid insurance because you have an llc. Find a good balance of both and don't overdo it. Thanks for watching and if you love that video, I've got a lot more. Please subscribe to my channel and I shoot weekly videos that can help you in your business, personal life and better live your American dream. Also, check out my newsletter free newsletter every week with blog articles, tips, strategies, tax deadlines. You'd love it. Also if you like social media, please follow me on social media with some daily tips and if you like to connect that way, it can be a lot of fun. But finally, please check out my tax and legal Library. I have 50 plus videos on these topics and more where I pull out a whiteboard and break them down. Hours and hours of helpful information that can better help you live the American dream.
