Homeowners insurance is essential—no debate there. But when it comes to putting your home in a trust, the waters can get murky. Let’s clear things up about how trusts impact your homeowners insurance and what steps you need to take to stay protected.
What Is a Trust, and Why Use One?
A trust is a legal arrangement where a trustee manages assets for beneficiaries. Trusts are popular among homeowners who want to transfer their homes and property to heirs while avoiding the costly and lengthy probate process. Setting up a trust is relatively straightforward and provides substantial benefits for your loved ones.
However, placing your home in a trust introduces new considerations for your homeowners insurance. Here’s everything you need to know to ensure your home remains fully insured before and after being placed in a trust.
The 5 Ws of Homeowners Insurance and Trusts
WHO Is Covered by Homeowners Insurance in a Trust?
When you transfer your home into a trust, you may lose insurable interest in the property. Your homeowners policy likely names you, your spouse, or family members as the insured. But once the home is in the trust’s name, it’s no longer technically yours—creating coverage gaps.
Example: A house fire damages your home. If the trust isn’t listed on your policy, only your personal items will be covered. The structural damage? Not insured.
Solution: Add the trust as an additional insured entity on your homeowners and umbrella policies.
WHAT Is Covered?
With the trust properly added to the policy, your homeowners insurance can cover:
- The residence itself.
- Property inside the home.
- Liability for injuries or damage to others’ property.
Potential Issue: If you don’t update your policy, coverage may only apply to personal property, leaving the trust liable for costly structural repairs.
Example: If a trustor accidentally floods the home, damage to furniture may be covered, but the trust would have to pay for structural repairs.
WHERE Does Coverage Apply?
Standard policies extend coverage to your home, property, and items taken elsewhere (e.g., a kayak loaned to a neighbor). But if the trust isn’t properly insured, coverage gaps arise.
Example: If a lawsuit names both you and the trust, but the trust isn’t listed on the policy, it must pay its own defense and settlement costs.
WHEN Does Coverage Lapse?
If your policy isn’t updated immediately after transferring the home to a trust, coverage could lapse. Work with both your insurance agent and an attorney experienced with trusts to ensure seamless coverage.
WHY Can’t a Policy Be in the Trust’s Name?
While a trust owns the home, the risks associated with it—like liability for injuries—still apply to the individuals living there. Naming the trust as the sole policyholder could leave you exposed, especially for personal liability or property contents coverage.\
HOW to Ensure Full Protection
To avoid costly mistakes:
- Keep your insurance policy in your name but add the trust as an “additional insured” entity.
- Ensure policy wording is precise—vague terms like “trust” won’t suffice.
- Maintain broad liability coverage and personal property protection under your existing policy.
For unique situations, like vacant land or rental properties, consult your insurance agent to tailor a plan that meets the trust’s needs.
Partner With a Knowledgeable Insurance Agent
Establishing a trust is a smart move to safeguard your property and loved ones, but overlooking insurance adjustments can have devastating consequences.
At Eugene C. Yates Insurance Agency, we have decades of experience navigating the intersection of trusts and homeowners insurance. Contact us today to ensure your home, trust, and loved ones are fully protected—no gaps, no surprises.