Getting Homeowner’s insurance policy for LLC?

[earlyretirement]

So I have a question for some of you experts. I don’t find too much on Google and thought maybe some of you might know the answer or maybe even if you can PM me referrals to any insurance agents you know.

I’m buying a home for the first time in California. I’ve owned before in Texas where they have strong homestead exemptions. I know this isn’t the case in California.

So I had my lawyer set up an LLC based out of Delaware and the sole purpose was to purchase the primary residence where we will live under the newly created LLC. This will provide asset protection. I haven’t come across anyone that has created an LLC to purchase a primary residence. Probably because the mortgage market these days is really tough/almost impossible with this sort of thing.

I’m to the point where I’m close to making offers so I went online to some online insurance companies to get quotes and while it’s easy and relatively cheap under my own name ($1,450 for a $1 million home)… so far all of the big insurance companies say they can’t insure a primary residence under an LLC.

Do any of you know any independent insurance agents that can help? This is an unexpected wrinkle as I didn’t think insurance companies would have a problem with this as there isn’t any more risk to them at all.

Maybe even additional creative ways to get around it like purchasing the policy under my own name but also naming the LLC on it?

Any help or referrals would be much appreciated.

[SK in CV]

It seems kind of obvious to me anyway. An LLC, by very definition, is a business or investment entity, therefore if an LLC owns property, it can’t be a primary residence. You’ll have to get business insurance (as if the house was a rental, minus all the extra deductions a rental can generate), which will probably be a bit more expensive and won’t cover contents. You should be able to get a reasonably priced renters policy for that. You’ll also have to register the LLC in California, and pay $800 minimum tax every year, in addition to annual registration fees (I think that’s $25 a year.)

Might be better off purchasing the home in your own name, with as large a mortgage as possible, then transferring it to the LLC, and buy all appropriate umbrella coverage. Unless of course, the homestead exemption is important to you because of a pending bankruptcy. In which case that transfer to the LLC would be voidable as a fraudulant conveyance.

If your attorney knew what you were planning on doing, he/she really should have advised you of the potention pitfalls.

[SK in CV]

It seems kind of obvious to me anyway. An LLC, by very definition, is a business or investment entity, therefore if an LLC owns property, it can’t be a primary residence. You’ll have to get business insurance (as if the house was a rental, minus all the extra deductions a rental can generate), which will probably be a bit more expensive and won’t cover contents. You should be able to get a reasonably priced renters policy for that. You’ll also have to register the LLC in California, and pay $800 minimum tax every year, in addition to annual registration fees (I think that’s $25 a year.)

Might be better off purchasing the home in your own name, with as large a mortgage as possible, then transferring it to the LLC, and buy all appropriate umbrella coverage. Unless of course, the homestead exemption is important to you because of a pending bankruptcy. In which case that transfer to the LLC would be voidable as a fraudulant conveyance.

If your attorney knew what you were planning on doing, he/she really should have advised you of the potention pitfalls.

[SK in CV]

It seems kind of obvious to me anyway. An LLC, by very definition, is a business or investment entity, therefore if an LLC owns property, it can’t be a primary residence. You’ll have to get business insurance (as if the house was a rental, minus all the extra deductions a rental can generate), which will probably be a bit more expensive and won’t cover contents. You should be able to get a reasonably priced renters policy for that. You’ll also have to register the LLC in California, and pay $800 minimum tax every year, in addition to annual registration fees (I think that’s $25 a year.)

Might be better off purchasing the home in your own name, with as large a mortgage as possible, then transferring it to the LLC, and buy all appropriate umbrella coverage. Unless of course, the homestead exemption is important to you because of a pending bankruptcy. In which case that transfer to the LLC would be voidable as a fraudulant conveyance.

If your attorney knew what you were planning on doing, he/she really should have advised you of the potention pitfalls.

[SK in CV]

It seems kind of obvious to me anyway. An LLC, by very definition, is a business or investment entity, therefore if an LLC owns property, it can’t be a primary residence. You’ll have to get business insurance (as if the house was a rental, minus all the extra deductions a rental can generate), which will probably be a bit more expensive and won’t cover contents. You should be able to get a reasonably priced renters policy for that. You’ll also have to register the LLC in California, and pay $800 minimum tax every year, in addition to annual registration fees (I think that’s $25 a year.)

Might be better off purchasing the home in your own name, with as large a mortgage as possible, then transferring it to the LLC, and buy all appropriate umbrella coverage. Unless of course, the homestead exemption is important to you because of a pending bankruptcy. In which case that transfer to the LLC would be voidable as a fraudulant conveyance.

If your attorney knew what you were planning on doing, he/she really should have advised you of the potention pitfalls.

[SK in CV]

It seems kind of obvious to me anyway. An LLC, by very definition, is a business or investment entity, therefore if an LLC owns property, it can’t be a primary residence. You’ll have to get business insurance (as if the house was a rental, minus all the extra deductions a rental can generate), which will probably be a bit more expensive and won’t cover contents. You should be able to get a reasonably priced renters policy for that. You’ll also have to register the LLC in California, and pay $800 minimum tax every year, in addition to annual registration fees (I think that’s $25 a year.)

Might be better off purchasing the home in your own name, with as large a mortgage as possible, then transferring it to the LLC, and buy all appropriate umbrella coverage. Unless of course, the homestead exemption is important to you because of a pending bankruptcy. In which case that transfer to the LLC would be voidable as a fraudulant conveyance.

If your attorney knew what you were planning on doing, he/she really should have advised you of the potention pitfalls.

[earlyretirement]

Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.

[earlyretirement]

Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.

[earlyretirement]

Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.

[earlyretirement]

Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.

[earlyretirement]

Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.

[SK in CV]

[quote=earlyretirement]Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.[/quote]

You could be right on the purchase and owning of the property. But renting it or selling it would qualify as “doing business”.

I explained why an insurance company would have a problem. LLC’s don’t have a primary residence. Real people do. You are not the same as an entity you own. Exactly the same reason a lender is unlikely to make a loan to an LLC in this circumstance. Same with the IRS. Primary residence benefits don’t all flow through.

If bankruptcy isn’t a current issue (which is pretty much the only time a homeowners exemption would come into play), just buy insurance. It’s cheaper, simpler, and probably more effective.

[SK in CV]

[quote=earlyretirement]Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.[/quote]

You could be right on the purchase and owning of the property. But renting it or selling it would qualify as “doing business”.

I explained why an insurance company would have a problem. LLC’s don’t have a primary residence. Real people do. You are not the same as an entity you own. Exactly the same reason a lender is unlikely to make a loan to an LLC in this circumstance. Same with the IRS. Primary residence benefits don’t all flow through.

If bankruptcy isn’t a current issue (which is pretty much the only time a homeowners exemption would come into play), just buy insurance. It’s cheaper, simpler, and probably more effective.

[SK in CV]

[quote=earlyretirement]Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.[/quote]

You could be right on the purchase and owning of the property. But renting it or selling it would qualify as “doing business”.

I explained why an insurance company would have a problem. LLC’s don’t have a primary residence. Real people do. You are not the same as an entity you own. Exactly the same reason a lender is unlikely to make a loan to an LLC in this circumstance. Same with the IRS. Primary residence benefits don’t all flow through.

If bankruptcy isn’t a current issue (which is pretty much the only time a homeowners exemption would come into play), just buy insurance. It’s cheaper, simpler, and probably more effective.

[SK in CV]

[quote=earlyretirement]Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.[/quote]

You could be right on the purchase and owning of the property. But renting it or selling it would qualify as “doing business”.

I explained why an insurance company would have a problem. LLC’s don’t have a primary residence. Real people do. You are not the same as an entity you own. Exactly the same reason a lender is unlikely to make a loan to an LLC in this circumstance. Same with the IRS. Primary residence benefits don’t all flow through.

If bankruptcy isn’t a current issue (which is pretty much the only time a homeowners exemption would come into play), just buy insurance. It’s cheaper, simpler, and probably more effective.

[Author]

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