If you are a homeowner or considering buying a home, you want to prioritize insuring that home. After all, having the right insurance protection is essential for when things go wrong, like covered perils such as lightning, severe weather, hail, and fire, that may cause damage to your home and property. But have you considered ways to protect your home and property above and beyond insurance? You may want to consider an LLC (Limited Liability Company) as one option that may provide added protection for your needs.
What is an LLC?
A Limited Liability Company (LLC) is where a person’s (homeowner’s) financial liability is limited to the value of the person’s investment in the home. This is clearly a benefit to having your home under an LLC. What this means is if there is a lawsuit filed against you, the assets would be limited to only the investment owned by the LLC and nothing more, so your personal assets would be protected. Keep in mind, unforeseen circumstances can and do happen. Limiting your personal liability for these unforeseen scenarios is key for protecting those personal assets such as retirement and savings.
Some Other Key Factors for Consideration of an LLC-Named Home
There are several characteristics of an LLC-Named home you should factor when deciding your specific needs, other than avoiding personal liability as addressed above.
Efficiency- In an effort to avoid the time, energy and expense of probate court, having your named-home under an LLC can be more efficient when settling the estate.
Pass-Through Taxation- Any income earned by the LLC is only taxed once at the individual level versus a corporate level. If you are the sole owner of the LLC, this pass-through taxation is a bonus.
Self-Employment Tax- This may be considered a drawback. Many times, homes owned by an LLC are vacation homes, rental properties or secondary homes which leads to a risk of a required self-employment tax.
Protection for an LLC-Named Home
It may not always make sense to place your home in an LLC, but if you do, you must know that an LLC is commonly considered a “business entity” which would put you at risk for being unqualified for personal insurance. However, the insurance industry understands the necessity for LLC coverage for your home. This is where an LLC endorsement comes into the equation. This endorsement can be purchased (for a nominal fee) to be added to your Alabama homeowners or personal umbrella policy. Not only does it provide coverage for your home, but “other structures” on the property as well.
Contact Burkett & Associates Today!
If you have any questions or concerns regarding LLC protection, contact our offices today at 256-704-7400. We offer specialized expertise and unique solutions to your specific Alabama insurance needs and can offer additional information about LLC endorsements/protection. Don’t wait! Call us today.
