Has your financial professional recommended the creation of a trust to help protect your assets? Perhaps you have already created a trust or LLC and deeded your property or vehicles to that new entity? In this article, we will provide some education and guidance on how your insurance portfolio needs to be amended after this occurs.
What is a common example of a trust and what does it have to do with my insurance?
One of the more common scenarios recommended by a financial professional is to title your residence or property in the name of a trust. Once a property is titled in the name of a new legal entity, the original deed holder is no longer the owner of that property. Since there are now two legal entities involved (the original deed holder and now the trust), both need to be accounted for on your insurance policies and documents as insureds.
Why does my trust need to be added to my insurance?
All insurance policies operate under the requirement that an insured has an “insurable interest” or some sort of ownership in the thing that is being insured. If the previous owner no longer holds title to a residence, they no longer have any insurable interest in that property. The entity that has insurable interest is now the trust.
What happens if I don’t add my trust to my insurance?
Consider a scenario where a residence is now titled into a newly created trust based on the recommendation of a financial professional. The family that has created the trust and resides in the residence is not aware that you need to notify your insurance professional to amend your insurance. A subsequent kitchen fire occurs and there is significant damage to the property that results in an insurance claim. That claim has the potential to be denied since the legal owner of the property is not listed anywhere as an insured entity on any of the policies.
What do I need to do to make sure the trust is covered as well as my family?
If you are working with a financial professional on the creation of a trust or LLC, notify your insurance professional at the same time so they can help amend your insurance portfolio. Your insurance agent can add the trust as an “additional insured” along with the original family members so that both legal entities have coverage. Some insurance companies also have options available that extend coverage to any trust or LLC that has financial interest in a property.
Working with families as their trusted insurance advisor is what we do every day. Connect with us for an insurance review and to make sure your family and residence is protected if you have a trust or LLC.
Flury-Hinderks Insurance is an Independent Insurance Agency located in Overland Park and is a trusted advisor for thousands of families in Johnson County. Contact Flury-Hinderks Insurance today for a comprehensive insurance review.
