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Q & A with America's real estate professor: Insurance liability umbrella

Zillow • Mar 20, 2013 at 4:07 PM

Q. I own a few rental properties and my insurance agent is suggesting getting a liability umbrella insurance policy. It sounds like a pretty good idea, and it’s pretty inexpensive. What do you think? Michael McKnight, Denver, CO.

A. Most homeowner, renter and landlord insurance policies have some liability coverage for items like dog bites, slips and falls, etc., where the homeowner might get sued over an issue. If the owner gets sued on a covered issue (issues not covered are business issues, illegal activity, etc.) the insurance company will step in, provide a lawyer to protect, negotiate, and/or settle any litigation or judgment against the owner, up to the policy amount. Normal home or landlord policies have $100,000 to $300,000 in coverage, depending on how much coverage that individual would like to purchase.

Umbrella policies extend that coverage above the normal policy amounts. They are usually done in increments of $1,000,000 and are very reasonably priced at $300-$400 per million in coverage. This reasonable pricing also tells us that these lawsuits do not happen very often due to that low cost, but that doesn’t mean they don’t happen. And you don’t want to be the lucky one who gets hit with a serious lawsuit.

If you have any net worth, or a good job and are building net worth, it’s a small price to pay for some good coverage.

Investor Real Estate Seminar

Q. I keep hearing radio and TV ads pitching these “free” real estate seminars (from nationally known real estate “celebrities”). I can’t imagine they are doing these out of the goodness of their hearts. Is there a catch? Thomas M., Minneapolis, MN

A. Yes, “free” never seems to mean free when it comes to real estate. Many of these groups promise get rich quick schemes with no money down, no risk, and even better, working part time out of your home for a six figure income! Those of us who actually own real estate and do the hard work to succeed in our investing, know that there is no easy money in property and there are no free lunches -- just hard work! However, that hard work brings a good probability of succeeding and earning a decent retirement on our investments.

In the “free” ones, once you arrive at the seminar they try to get you to commit to a couple of thousand dollars per month for “enhanced” training and consultation. I’ve never seen or known of one of these get rich quick schemes to do much for the attendees, other than draining their bank accounts.

I would suggest looking for some local real estate investment clubs. There are many under the Meetup.com website. For example, in San Diego, the SDFIBI.com monthly meeting is a great place to network with real investors and learn about real estate without pressure or big sales pitches. Note that there are some clubs that are just lead generators to sell overpriced courses or properties, but at $10-$20 per meeting you don’t have much to lose and if you don’t like what you see, find another one! Do search for “real estate clubs Minneapolis” and hopefully you’ll find a good club where you can network and learn. Good luck!

EDITOR'S NOTE: This story was written by Leonard Baron, MBA, who is known as America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt!

Email Your Questions to: Leonard@ProfessorBaron.com


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