Ensuring Proper Insurance Coverage for Properties Held in a Trust

 

Placing property in a trust is a strategic move for both estate planning and asset protection. Whether it’s a residential home or a commercial property, holding real estate in a trust helps manage ownership, protect beneficiaries, and avoid probate. However, one critical detail that property owners often overlook is ensuring that the insurance policy correctly names the trust as the insured party.

Failing to update the insurance policy after transferring property into a trust can lead to major complications, including coverage denials, legal disputes, and financial loss. That’s why it’s essential to ensure that the trust is properly listed as the named insured on all property insurance policies.

Why Should the Trust Be the Named Insured?

When a property is placed into a trust, legal ownership shifts from an individual or business entity to the trust itself. However, if the insurance policy still lists the previous owner as the insured party, it can create several problems:

1. Claim Denials – Insurance companies may refuse to pay claims if the named insured no longer has ownership rights. If a fire, natural disaster, or liability issue occurs, this can result in out-of-pocket expenses for repairs, legal costs, or settlements.
2. Coverage Gaps – Some policies may not extend full coverage to properties held in a trust unless the trust is explicitly named as an insured party. This could leave critical exposures unprotected.
3. Legal and Financial Confusion – If a claim is filed but the trust is not properly named on the policy, trustees and beneficiaries may face significant legal hurdles in proving ownership or accessing claim benefits.
4. Commercial Property Risks – For businesses, properties held in a trust may have even more at stake. Commercial real estate often carries higher liability risks, tenant obligations, and business interruption concerns. If the trust isn’t properly listed on the insurance policy, a claim dispute could result in costly legal battles and operational disruptions.

Steps to Ensure Proper Coverage

To avoid these risks and ensure full protection for both residential and commercial properties, property owners should:

✔️ Review the Existing Policy – Check the current insurance policy to see who is listed as the named insured. If the trust is not mentioned, action is needed.

✔️ Contact the Insurance Provider – Inform the insurer that the property has been placed in a trust and request that the trust be added as the named insured or an additional insured.

✔️ Provide Trust Documentation – Most insurers will require a copy of the trust agreement or relevant documents to verify ownership and ensure compliance.

✔️ Work with a Knowledgeable Insurance Agent – Trusts can be complex, and not all insurance providers handle them the same way. Partnering with an agent experienced in insuring trust-owned properties ensures the right coverage is in place.

Get the Right Coverage with Morning Star Agency Insurance Services

Ensuring that your residential and commercial properties are properly insured within a trust is essential for asset protection and risk management. At Morning Star Agency Insurance Services, we specialize in helping property owners navigate the complexities of trust-owned insurance policies.

Contact us today at (866) 546-5598 to review your current policy and make sure your trust-held properties have the right protection!