Insurance: Real Estate Held in Trust

Rumor is, some Los Angeles fire victims are having difficulty with their insurance when the home is held in trust. While I find this hard to believe, naming the trust as an insured or additional insured usually avoids the issue.

Why Put Your Home In A Trust

A personal residence (a “home”) is often held in trust. Holding the home in trust gives the homeowner a certain level of privacy, asset protection, and avoidance of probate at death.  But, when the insurance company is not informed of a transfer to a trust, problems with insurance coverage and delays in payment can occur.

So, What’s The Fix?

Ideally, in addition to the homeowner, the trust is listed as an additional, named insured. The insurance company may not agree to add the trust as a named insured. In our experience, most Colorado insurers will add the trust as an additional insured.  However, the coverage of an additional insured is not as comprehensive as the coverage for a named insured.  How real estate held in trust is insured can vary based upon whether the real estate is a home, a rental property, or in an LLC/Company. For example, when it is a home, the trust may be named as an additional insured and the homeowner the named insured. When it is rental property, the the trust may be the named insured with those holding an insurable interest named as additional insured. And when an LLC/Company, the LLC may be the named insured with others (like a manager) named as additional insured. If there is an umbrella policy, the trust may be listed as a second, named insured. It varies based upon the insurer and policy.

Applies To Most Insured Property

This same concept applies to any insured property including boats, cars, guns, art, etc. When insured property is transferred to a trust or other entity, qualified insurance professionals should be consulted.