Are Properties in a Trust Covered by Insurance? Here’s the Real Story.

In the wake of recent natural disasters, especially the devastating floods and the fires in California, many social media posts have claimed that if your property is held in a trust, it won’t be covered by insurance. This is not entirely accurate. While it is true that you can face coverage gaps if your trust is not listed properly on your homeowner’s insurance, you can absolutely secure and maintain full coverage with the right steps. (Similar rumors exist about properties held in LLCs, which have their own specific considerations.)

Understanding the Ownership-Insurance Connection

Our firm frequently guides clients through the intricacies of estate planning and property ownership, including the essential role insurance plays. When you place your home into a trust, you are changing its legal owner from yourself to that trust. Because an insurance policy must accurately reflect ownership, failing to update your policy can leave you vulnerable to denied or delayed claims. The solution? List the trust as an additional insured (or named insured) on your policy. Doing so ensures that both you and the trust are covered, eliminating any mismatch that might lead to a gap in coverage.

Trust Maintenance Matters

Another common misconception is that setting up a trust is a one-time task. In reality, estate planning is an ongoing process, and keeping your documents current is just as crucial as creating them in the first place. If you refinance, buy or sell property, or make any other significant life changes, it’s essential to revisit and “fund” your trust accordingly. This not only keeps your estate plan valid but also ensures your assets remain fully protected. At the same time, coordinating with your insurance agent is vital, so your policy reflects these changes and your coverage stays intact.

Taking Action to Protect Your Assets

Having helped numerous families protect their assets through proper trust planning, I understand the unique challenges of safeguarding property against unexpected events. If your homeowner’s insurance doesn’t currently list your trust, now is the perfect time to take action. Contact your insurance provider for guidance on adding your trust as an insured party. And if your home isn’t in a trust at all, we can help you explore the benefits of creating and funding one the right way.

Ready to protect your biggest investment? Contact our office to schedule a consultation and we’ll help ensure your property is properly protected, from the legal details to the finer points of your insurance policy.