Why Your Home Insurance Needs Updating When in a Trust
Transferring properties into a trust is a common estate planning strategy. It helps homeowners protect their assets, avoid probate, and ensure a smooth transition of ownership. However, many people don’t realize that moving a property into a trust can impact their homeowners insurance.
Since a trust becomes the legal owner of the property, insurance companies often require updates to the policy. If the trust is not properly listed, coverage gaps may arise. In the event of damage, liability claims, or other incidents, failing to update your policy could lead to unexpected financial risks. Some insurers charge a small fee to make these changes, while others do not.
To ensure full protection, it’s important to understand how properties in a trust affect insurance coverage. Below, we’ll explain why updating your policy is essential, the key differences between additional insured and additional interest, and how to complete the process smoothly.
What Happens When You Put Your Home in a Trust?
Placing your home in a trust means transferring ownership from yourself to the trust entity. While this helps with estate planning and asset protection, it also changes how insurance companies view the property. Many homeowners assume their existing policy remains valid, but this is not always the case.
When properties in a trust are not listed correctly on an insurance policy, claims can become complicated. Some insurers may even deny coverage because the named insured does not match the legal owner. Fortunately, adding the trust to the policy is a simple fix that prevents potential issues.
Why Your Insurance Policy Needs an Update
Updating your homeowners insurance is necessary when properties in a trust are involved. Insurance companies need to recognize the trust as part of the policy to ensure proper protection. Without this update, the trust may not be covered for property damage or liability claims.
Some insurers require the trust to be listed as an additional insured, which extends liability and property coverage to both you and the trust. Others only require an additional interest designation, meaning the trust receives policy notifications but does not get coverage. Knowing the difference is crucial when making updates.
Additional Insured vs. Additional Interest—What’s the Difference?
When dealing with insurance for properties in a trust, you may encounter two terms: additional insured and additional interest. Although they sound similar, they serve different purposes:
- Additional Insured: The trust receives full protection, including liability and property damage coverage.
- Additional Interest: The trust is listed on the policy but does not have coverage. It only gets notifications regarding changes.
Each insurance company has different rules regarding how they list a trust. Checking with your insurer ensures your property remains fully covered.
How to Update Your Policy and What It May Cost
Updating your insurance policy is simple, and we’re here to help! At Nickerson Insurance Services, INC., we specialize in ensuring that your policies have the right coverage. Our team will guide you through the process of adding the trust to your policy as an additional insured or additional interest, making sure there are no gaps in protection.
Some insurance companies update policies for free, while others may charge a small administrative fee. No matter the case, ensuring your home is fully covered is crucial.
Contact us today, and we’ll handle the details—so you can have peace of mind knowing your property is properly insured.
If you own properties in a trust, updating your insurance policy is a critical step. Without this update, your home may not have the full coverage it needs. By ensuring the trust is properly listed, you can protect both your property and your financial future.
