If you’re thinking about placing your home into a trust or into an entity such as an LLC don’t forget about your insurance! A few times a year we’ll have a customer call in for a home insurance quote and we’ll notice that the homeowner is listed as a trust or an entity such as an LLC. By itself, this isn’t really a big deal. However, when we request the prior insurance, we sometimes see that the insured listed on the policy is not the trust or the entity but rather the trustees of the trust or the members of the LLC. The trust or LLC is nowhere to be found on the policy.
Is this a big deal?
This scenario of not having the Trust or Entity listed as an insured on the home insurance policy can potentially cause huge problems for you in the event of claim. In 2018, the Michigan Court of Appeals said that when a trust owns real estate and there is an claim event on the property, if the trust is not listed as an insured on the insurance policy, the insurance company does not have to pay the claim. While this decision wasn’t handed down in Florida but Michigan, it should be enough of a shock to make you take pause.
So what should you do?
Generally speaking, you’ll want to add the trust as an additional insured and list the trustees as named insureds on the home insurance policy. And if the property is in the name of an LLC, you’ll want to list the LLC as the named insured. Lastly, if you’re thinking about changing the ownership of your home – always call your agent or your insurance company before you make any changes. Doing so can save you from having a huge problem down the road.
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