What You Need to Know When Insuring Your LLC-Named Home

Have you considered ways to protect your home beyond insurance? Are you concerned about planning for your estate? Placing your home in either a trust or a Limited Liability Company (LLC) are great options to avoid certain estate tax penalties. 

While trusts are more well-known as an estate planning tool, an LLC may be the right choice for your needs.

What is an LLC?

An LLC is a hybrid business entity with characteristics of both a corporation and a partnership. However, it is not a true corporation. Owners of the LLC are called members, and it is controlled by a single manager or multiple managers if more than one person is involved in the LLC.

Top 3 Benefits of an LLC-Named Home

Benefit #1: Limited Liability

One of the benefits of an LLC is limited liability, which means that in the event of a lawsuit, a creditor could only go after the assets owned by the LLC. In these cases, your personal assets like savings and retirement accounts would be protected. 

Benefit #2: Pass-Through Income Taxation

An LLC is only taxed once, and when it is, it’s taxed at the owners’ level rather than the corporate level. 

Benefit #3: Efficiency

LLCs can help quickly settle an estate, helping you avoid the time and expense of probate court.

Disadvantages of an LLC-Named Home

Alongside many advantages of naming your home an LLC, there are also drawbacks. For example, there’s the possibility of a self-employment tax. And most often, homes owned by an LLC are secondary or vacation homes, or rental properties, so it may not always make sense to place your home in an LLC.

5 Steps to Form an LLC

Forming an LLC is relatively easy. Follow these five steps to set you up for success.

Choose a name that complies with your state’s requirements

File the formal paperwork called “Articles of Incorporation.” 

Pay any filing fees. 

Create an operating agreement.

Obtain any necessary licenses.

How do I protect my LLC-named home?

While an LLC is typically considered a business entity and ineligible for personal insurance, the insurance industry recognizes a need for LLC coverage for your home. 

Some insurance companies, including Central, offer an LLC endorsement that can be added to your homeowners or personal umbrella policy. This endorsement provides coverage for the home itself, as well as other structures on the property such as a detached garage or fence. It can also provide personal liability coverage and medical payments to others should the LLC manager or members be found liable for an accident on the property.

Let Central be your resource for LLC protection

With our specialized knowledge and unique solutions, Central can help avoid costly gaps in coverage and ensure your LLC-named home is fully protected. Contact your Central agent to learn more about our LLC endorsement.  

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