LLC rental property insurance in Texas

Short answer. Insure a Texas rental in the name of whoever holds title. If your LLC owns the house, the LLC should normally be the named insured, and your lender shown as mortgagee. Ask whether you, as member or manager, and your property manager are protected too. A policy in your own name on the LLC's house can complicate a claim.

Whether to own rentals in an LLC at all is a question for your attorney and your CPA. This guide starts where that decision ends: the LLC exists, it owns (or will own) the house, and the insurance needs to match.

Who should be the named insured?

The named insured is the person or company the policy is issued to: the "you" in the policy. On the Texas Department of Insurance's standard dwelling form, the Texas Dwelling Policy Form 3 (TDP-3), "you" means "the 'named insured' shown in the declarations and the spouse if a resident of the same household" (TDP-3, Definitions). The TDP-3 was last revised in 2002, and many insurance companies now use their own forms, and wording differs. The declarations page, the first page of your policy, shows who the named insured is.

When an LLC owns the house, the LLC is the owner, not its members. Texas law says a member of an LLC "does not have an interest in any specific property of the company" (Bus. Orgs. Code §101.106(b)). That is why the LLC, spelled exactly as on the deed, is normally the named insured.

Not every insurance company will write a landlord (dwelling) policy in an LLC's name. Some do; others may ask for a commercial policy instead. Ask before you move the deed, not after.

When the deed and the policy don't match

A mismatch usually happens innocently: the house was bought in a personal name, deeded to an LLC later, and the policy renewed unchanged year after year. It matters at claim time for three reasons:

1. Whether the named insured owns the house (insurable interest). On the TDP-3, the insurance company is not liable in any loss "for an amount greater than the interest of a person insured under this policy" (TDP-3, Conditions). If the named insured no longer owns the house, whose interest the policy covers becomes a question the insurance company may ask before it pays.
2. The policy doesn't move with the deed. The TDP-3 says "assignment of this policy will not be valid unless we give our written consent." Deeding the house to your LLC does not, by itself, make the LLC the insured.
3. The application has to be right. The same form says the policy "is void as to you, if you have intentionally concealed or misrepresented any material fact." Texas law lets an insurer rely on that only if the fact was material to the risk or contributed to the loss (Ins. Code §705.004). Even so, an application that names the wrong owner can cause problems when you claim.

The fix is simple and should come first. Tell your insurance company or your agent before the deed changes, or as soon as you learn it has changed. The insurance company can change the named insured by endorsement (a form attached to the policy that changes it) or issue a new policy. Then send the new declarations page to your lender. Moving the deed can affect other things too, such as your loan and your title insurance. Ask your attorney and your title company about those.

Additional insureds and additional interests

These two terms are easy to mix up (see also the glossary):

• An additional insured is someone the policy also protects, in the way its endorsement describes, usually against liability claims. A property manager is a common example. It is not the same as being the named insured.
• An additional interest (sometimes "interested party") is someone the policy records only so that it is told about changes or cancellation. It is not protected by the policy and is not paid on a claim. A lender that should be paid on a building claim belongs in the mortgagee slot instead.

Liability and umbrella when an LLC owns the rental

• Liability is not automatic on a landlord policy. The TDP-3 has no liability section. Check that the LLC's policy carries premises liability, and at what limit. See Landlord liability insurance in Texas.
• An LLC does not replace insurance. Texas law says a member or manager is generally "not liable for a debt, obligation, or liability" of the LLC (Bus. Orgs. Code §101.114), but an injury claim can still name you personally, and the LLC's own assets, starting with the house, are exposed to a claim against the LLC. How far the LLC protects you is a legal question for your attorney. Whether the policy defends you is a question for your agent.
• Check the umbrella. The Texas Department of Insurance says an umbrella policy "would kick in after your auto or home insurance stops paying" and "pays up to at least $1 million" (TDI). A personal umbrella may not cover property owned by an LLC, and may exclude rentals. An umbrella in the LLC's name, sitting above the LLC's own liability limits, may be the better fit. Ask the umbrella insurer in writing which properties and which owners it covers.
• Several LLCs, several policies. A policy protects the named insured and the insureds it defines. If each rental sits in its own LLC, check that each LLC appears on the policy that covers its property, and on any umbrella above it.

Series LLCs: one policy, or one per property?

Texas has allowed series LLCs since 2009. Since June 1, 2022, the code calls them protected series and adds registered series, which are formed by filing a certificate with the Texas Secretary of State (Bus. Orgs. Code §§101.601–101.602). The parts that matter for insurance:

• Read the deed. A series can "hold title to assets … including real property" in its own name (§101.605), but a series' assets may also be held in the name of the LLC (§101.603). Insure the owner the deed names.
• Ask your attorney about the separation. The protection between series depends on each series keeping its own records (§101.602(b)). Whether sharing one insurance policy across series affects that is a legal question.
• Ask the insurance company. Does it write series LLCs? Will it put several series on one policy with a schedule of properties, or does it want one policy per property? If one liability limit is shared across several houses, one claim at one house can use up the limit for all of them.

Loan in your name, title in the LLC

This is common with rentals bought with a personal mortgage and deeded to an LLC afterwards. Two things to sort out, both before you move the deed if you can:

• What the lender wants on the policy. Loan documents vary, so ask your lender in writing. For loans sold to Fannie Mae, the policy on a one- to four-unit property "must name all persons holding title to the subject property as named insured" (Fannie Mae B7-3-08). A lender may also want the borrower named. The mortgagee clause stays either way.
• The loan itself. Many loans let the lender demand full repayment when the house is transferred (a "due-on-sale" clause). Federal law lists some transfers a lender may not treat that way (12 U.S.C. §1701j-3(d)), but the federal rule gives those protections only for a home the borrower lives in or will live in (12 CFR §191.5(b)). So for a rental, don't assume any transfer, to an LLC or to a trust, is protected. That does not mean a lender will call the loan. Ask your lender and your attorney before you move the deed.

If the policy's name stops matching what the lender's records expect, its insurance tracking may treat your proof of insurance as missing, and that is how lender-placed coverage starts. See force-placed insurance.

A short checklist

• The deed's owner, exactly as written, is the named insured on the declarations page
• Every co-owner on the deed is named
• The insurance company knew about any deed change and agreed to it in writing
• The lender is shown as mortgagee, and has the current declarations page
• You know whether you, as member or manager, are protected for claims that name you
• The property manager's protection is settled: yours, theirs, or both
• Premises liability is on the LLC's policy, and any umbrella covers the LLC and this property
• For a series LLC: each property's policy names the series or company that holds its title

This guide is general information, not legal or tax advice. Ask your attorney about forming or using an LLC or series LLC and about moving a deed, and your CPA about the tax side. AIV Insurance is an independent insurance agency in Texas, not an insurance company: we don't issue policies, and claims go to your insurance company. If you'd like us to check whether your policy's named insured matches your deed, email hello@aivinsurance.com or reach us through the contact page, tell us whose name is on the deed, and we'll tell you how to share your declarations page securely.