Every insurance company has a set of underwriting questions I answer when writing or quoting a home insurance policy. Some of these will preclude a company from writing a home insurance policy such as the presence of certain dog breeds, foundation or roof types, etc. Others use the answers to these questions to confirm how the policy should be structured.
There are a couple that don’t come up frequently, but are worth exploring for people where they may apply. The one we’ll explore this week is how home insurance companies respond when the primary home is owned by a trust. I’ll address why they will or won’t write a policy when this type of ownership is present.
Some individuals may elect to have a trust in addition to a will. This may be for a variety of reasons such as the size and complexity of the estate or for privacy reasons since wills are subject to the public domain once they enter a Texas probate court. Regardless of the reasons someone may have for moving assets into a trust, some home insurance companies will write a home policy when a trust owns the home and others will not.
The companies that don’t usually prefer not to do so as it makes processing a claim more difficult (who signs?), potential financial exposure if a personal injury claim occurs, or that’s not the market they want to focus on. Regardless of the reason, the mere presence of the home’s ownership by a trust is grounds for denying coverage.
Other insurance companies will write the policy; however, they may require the person(s) living in the home to be named as primary insured and the trust to be listed as an additional insured. An additional insured may be a person or entity who has a financial interest in the home such as a mortgage company or parent who’s purchasing the home for their adult son or daughter.
Other companies will write the policy with the trust listed as the primary insured if it’s an individual or family trust, for example the Ed Wise trust or the Wise family trust. These same companies may deny coverage if the trust is not in an individual’s or family name for reasons of who owns the trust and the level of administrative complexity.
There are companies which specialize in families with complex financial matters who have no issue writing a policy regardless. This is the client they specialize in and they do this on a regular basis. They may require additional information if the trust isn’t in an individual or family name before issuing a home insurance policy such as how it relates to the family who’ll be occupying the home.
The key when a trust is present, as in most underwriting questions, is for the agent to know about the trust and to discuss it with underwriting before it becomes an issue. If you are considering creating a trust, or already have one, discuss this thoroughly with your agent. Not doing so may lead to an unwelcome surprise should you have a claim. Do you have a question, comment, or experience you’d like to share? Please share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
