Tag Archives: property insurance explained

LLC vs. Individual – Rental Property Owner

 LLC vs. Individual – Rental Property Ownermeter

Should you form an LLC if you own rental property? The decision to form an LLC is complicated and each landlord’s situation is different. The first LLC came into existence in the U.S. in 1977 in Wyoming, since then all 50 states have enacted LLC legislation.  Here are some pros and cons to  help you decide if an LLC is right for you.

PROS

  • Protect your personal assets from lawsuits: If someone sues you when set up as an LLC, your personal assets are protected. Only the LLC’s assets are at risk.
  • Pass-through taxation: Pass-through taxation is an IRS related ruling allowing LLC profits to be passed directly to the owner. Taxes are paid on by the individual, avoiding double taxation.
  • Easier management responsibilities: LLCs are much more easily managed than corporation or partnerships and many states offer reduced fees.

CONS

      • It costs money to set up an LLC: You can set up an LLC with the State Corporation Commission and pay a small fee. Many people choose to use an attorney or hire a services company. These options cost from a few hundred to a few thousand dollars.
        • Keep your money separate: It is important that you never mingle your LLC money with your personal money. The slightest infraction could cause a litigant to claim the LLC is not a separate entity, causing you to lose any LLC protection.
  • Mortgages can complicate: If you already have a rental dwelling with a mortgage on it, changing to an LLC could look like a sale to your mortgage company. If you have a due-on-sale clause in your mortgage it may cause the mortgage company to require payment in full.

 

The decision to form an LLC is complicated and each landlord’s situation is different. Consider the above information and consult with your CPA or attorney to see if an LLC benefits you. Then let the experts at Cobb-Hall provide insurance solutions designed specifically for your needs.

Home Insurance-Clear Explanation

Confused about your Home Insurance? Here are some basics. Real Estate symbol

Most homeowner’s policies contain a variety of coverages Here is a brief explanation of just some of the coverages to help you when considering your choices in purchasing insurance for your home.

Home (Definition: The building structure)

Replacement Cost  Most homeowners’ policies will pay to rebuild your home if it was completely destroyed. In addition to the structure, coverage includes the wiring, plumbing, heating and air conditioning.  Policies are issued for the amount it would cost to rebuild your home.  Your agent can assist you with determining the correct insurance value as land and unattached buildings are not included in this amount.  It is important to note that there are claim payment penalties for homes that are greatly under insured.

Coverage Typically losses covered by a homeowner’s policy are for fire, windstorm, hail, lightning, theft or vandalism. Other damage may be covered, but generally these policies do NOT cover flood or earthquakes.

Deductible  You can choose from a variety of deductible amounts.  A deductible is an amount of money that you pay first for any loss.  Many people choose between $1,000 and $2,000, usually the higher your deductible, the lower your premium.

Personal Property  (Definition: Contents-Imagine shaking your house upside down, what falls out is considered contents.)

Replacement Cost   Covering your contents for replacement cost versus actual cash value is recommended.  Like it sounds, replacement cost is what you pay to replace an item; actual cash value is what the item is worth after depreciation.  For example: if your sofa is destroyed in a fire, replacement cost on contents coverage would allow the company to reimburse you the cost of a new sofa.  Actual cash value coverage limits the company payment to the amount your old sofa was worth if you were to sell it.

Liability (Definition- Cost for damage/injury to others  you are legally obligated to pay.)

Liability  Homeowners policies include coverage for injury or damage to others when you are sued or determined to be legally liable.  Examples include; injury if someone falls on your icy sidewalk, your dog bites a neighbor or damage if your child breaks a friend’s expensive Chinese vase. Consider your assets when deciding on a liability limit, For many people  $500,000 adequate, but other limits are available.

 Contact Cobb-Hall Insurance to help you determine the insurance protection that best fits your needs.