Trusts & Homeowner’s Insurance: What You Need to Know So You Don’t Get a Claim Denied In the Future

When you create a Life & Legacy Plan with a living trust, you’re taking an important step to protect your home and loved ones. However, one common mistake could put your home at risk – failing to update your homeowner’s insurance after transferring your property into a trust. If your insurance policy doesn’t reflect the trust as the legal owner, your claim could be denied when you need it most. Let’s explore how to ensure your trust and insurance work together to safeguard your home.

The Risk of Not Updating Your Insurance

Once you place your home in a trust, its legal ownership changes. While you still live there and manage the trust, the property technically belongs to the trust. If your insurance policy still lists you as the owner instead of the trust, your insurer might refuse to pay a claim. Imagine discovering after a major disaster – like a fire or flood – that your claim is denied simply because your policy was never updated. This situation happens more often than you might think, but it’s easy to prevent.

How to Align Your Insurance with Your Trust

To avoid problems, notify your insurance company as soon as you transfer your home into a trust. Most insurers can update your policy with a simple trust endorsement or by adding the trust as an additional insured.

When making this update, be sure to check:

• Property Coverage?– Make sure your policy covers the full replacement cost of your home, considering rising construction costs.
• Liability Protection?– Your policy should protect both you and the trust in case someone is injured on your property.
• Other Structures?– If you have detached garages, sheds, or workshops, confirm they’re covered under the trust’s ownership.

Most insurance companies make these updates with little or no extra cost, but taking this step can prevent financial disaster later.

Common Mistakes That Leave Your Property Unprotected

Many homeowners assume their insurance is fine until they need it – and then it’s too late. Here are some common mistakes to avoid:

• Waiting Too Long?– Some homeowners forget to update their policy for months or even years after transferring their home into a trust. This means they’ve been paying for insurance that might not cover them.
• Incorrect Trust Names?– The trust’s full legal name must be listed exactly as it appears in your trust documents. A small mistake could cause major problems during a claim.
• Skipping Regular Policy Reviews?– Your insurance needs change over time. Regularly reviewing your policy ensures your coverage keeps up with your home’s value and your family’s situation.
• Not Updating Multiple Properties?– If you own more than one property in trust, make sure each one has the correct trust ownership reflected in its policy.

A Complete Approach to Protection

Avoiding these pitfalls is part of my?Life & Legacy Planning?process. Unlike DIY estate plans or basic legal document services, my approach ensures that every detail is properly handled, including:

• Creating a?complete inventory of your assets, so we know what properties need to be reviewed and updated.
• Regular check-ins?to review your Life & Legacy Plan and insurance coverage to ensure they work together.
• Guidance on properly transferring assets?into your trust to avoid ownership mismatches.

Protect Your Home and Loved Ones

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.

To learn more about our one-of-a-kind systems and services,?contact us?or?schedule a no-obligation 15-minute introductory phone call?today.