As a business partner offering AmeriEstate’s estate planning services, you play a crucial role in helping clients protect their assets. Many homeowners understand the importance of having home insurance, but they may not realize that transferring their property into a living trust can create coverage gaps if their policy isn’t updated properly. This oversight can lead to denied claims, liability risks, or even policy cancellations—leaving your clients unprotected when they need it most.
Encouraging your clients to establish a living trust is a key step in protecting their assets. However, they must also ensure their home insurance policy reflects this change in ownership. Here’s why adding their trust to their homeowner’s insurance is essential and how you can guide them through the process.
Why Clients Need to Add Their Trust to Their Home Insurance Policy
When a homeowner transfers their property into a living trust, the trust becomes the legal owner. Unfortunately, many clients assume their existing homeowner’s policy will automatically extend coverage to the trust. Without proper updates, this misunderstanding can lead to:
- Claim Denials: If a fire, storm, or other covered incident damages the home, the insurance company may reject the claim, stating that the trust (the legal owner) is not listed on the policy.
- Liability Issues: If someone is injured on the property, liability coverage may not extend to the trust, putting the trustee and beneficiaries at financial risk.
- Policy Cancellation: Insurance companies regularly assess risk and ownership changes. If they discover the property is now held in a trust and was not properly updated in the policy, they may cancel the coverage altogether.
To protect their home and financial future, your clients need to ensure their trust is correctly added to their insurance policy. Encourage them to take these steps:
Notify Their Insurance Provider
- Instruct them to contact their insurer and inform them that their home is now owned by a revocable living trust.
- Ask about the process for adding the trust as an additional insured party.
Provide Necessary Documentation
- Insurers may request a copy of the trust document or a certificate of trust to verify ownership.
- A copy of the grant deed confirming the property transfer may also be required.
Ensure Proper Policy Wording
- The policy should explicitly name the trust as an insured party to prevent any disputes.
Review the Updated Policy
- Clients should verify that their policy includes the trust and that all liability and property coverages extend to it.
- Check for any new exclusions or limitations related to trust ownership.
Keep Policies Updated
- Remind clients to update their insurance policy if they modify their trust or change insurance providers.
- Failing to do so could leave their property vulnerable to uncovered losses.
Understanding the difference between “additional insured” and “additional interest” is critical when adding a trust to a homeowner’s policy.
- Additional Insured: This status extends full liability protection to the trust, ensuring that it has the same coverage as the individual policyholder.
- Additional Interest: This only notifies the insurance company of the trust’s existence without extending full coverage. This status does not offer protection against claims or losses.
For comprehensive protection, clients should request “additional insured” status for their trust.
As an AmeriEstate Business Partner, you have access to expert estate planning services that ensure your clients are properly protected.
Encourage them to take action today. If they own a home or other property and don’t have a living trust, refer your client to AmeriEstate for a free consultation. By working together, we can provide a complete solution that safeguards their home and legacy.
