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

Creating an estate plan with a living trust is a vital step in safeguarding your home and family from costly legal proceedings. However, many homeowners overlook the need to update their homeowner’s insurance after transferring their property into a trust. Failing to do so could result in a denied insurance claim, leaving you responsible for costly repairs. Let’s explore how to align your trust and insurance to ensure your home remains fully protected.

The Hidden Risk of Trust Ownership

Transferring your home into a trust alters its legal ownership structure. While you may continue living in the home and serving as the trustee, the trust itself becomes the legal owner. If your trust is revocable, this change won’t affect your taxes since you remain the owner for tax purposes. However, the title change could give your homeowner’s insurance company a reason to deny a claim. Even if such a denial could be challenged in court, avoiding that hassle altogether is the best approach.

Insurance companies base their coverage decisions on legal ownership. If there's a mismatch between the property's legal owner and the named insured on your policy, the insurer might deny your claim. Imagine discovering after a major fire that your insurance company denies your claim because your policy doesn't reflect your trust ownership. This nightmare scenario happens more often than you might think, but it's easily avoidable with proper planning.

Aligning Your Insurance with Your Trust

The key to avoiding issues is to notify your insurance company as soon as you transfer your home into a trust. Most insurers are familiar with trust ownership and can update your policy accordingly. This is usually done by adding the trust as an additional insured or including a trust endorsement to ensure proper coverage.

When updating your policy, consider these key elements:

Property Coverage: Ensure the policy's replacement cost accurately reflects current building costs in your area. Construction prices have soared recently, and many policies haven't kept pace.

Liability Protection: Your policy should protect both you personally and the trust from liability claims if someone is injured on your property.

Additional Structures: Don't forget to include coverage for detached garages, workshops, or other structures on your property under the trust's ownership.

Most insurers make these updates with minimal or no additional premium costs, but the protection they provide is invaluable. This small administrative task could save you hundreds of thousands of dollars if disaster strikes.

Common Mistakes That Put Your Property at Risk

Homeowners often realize too late that they weren’t fully protected when disaster strikes. However, by understanding the most common pitfalls, you can take proactive steps to safeguard yourself:

Delayed Notification: Many people wait months or even years to inform their insurance company about the trust transfer. During this gap, they're paying for insurance that might not protect them. Instead, notify your insurance company as soon as you create or update your trust.

Incorrect Trust Names: Insurance policies must list the trust's exact legal name. Even small discrepancies could cause problems during a claim. If your trust is "The Johnson Family Living Trust dated January 15, 2025," that's exactly how it should appear on your insurance policy.

Overlooking Policy Reviews: Your insurance needs will change over time. Regular reviews ensure your coverage keeps pace with your home's value and your family's needs.

Multiple Property Confusion: If you own multiple properties in trust, each property's insurance policy must correctly reflect the trust ownership. Don't assume that updating one policy covers all your properties.

Creating a Comprehensive Protection Plan

Avoiding these pitfalls is a key component of my comprehensive estate planning approach, known as Legacy Planning. If you have a DIY estate plan, one downloaded from a budget legal site, or even a plan created by a traditional estate planning attorney, you may receive the necessary documents—but not a fully integrated plan that anticipates and addresses potential risks. That’s why our Legacy Planning process includes…:

• A current inventory of your assets so we can look at how your property is owned and what properties could be at risk;
• Membership plans for regular, ongoing reviews of both your plan and insurance documents to ensure they remain synchronized. Major life events like marriages, divorces, or deaths in the family might require updates to both your trust and insurance policies;
• Guidance on how to accurately and fully transfer your assets to your trust; and
• Much, much more.

We Help You Protect What Matters Most

At Adams Law Office, we ensure your Legacy Plan works as intended, including proper alignment with your homeowner’s insurance coverage. We'll help you avoid costly mistakes and maintain comprehensive protection for your home and family. Our membership process includes regular reviews to keep your plan current and effective.

Act Now to Secure Your Legacy
✅ Download Our Free Guide: “Homeowner’s Insurance & Trusts: Avoid These 5 Costly Mistakes” – Ensure your policy fully protects your home and loved ones.
✅ Schedule a Policy Review: Contact us today for a free homeowner’s insurance audit to confirm your trust is correctly listed.
✅ Share This Resource: Know a homeowner with a trust? Forward this article to help them avoid claim denials.

Don’t Wait for Disaster to Strike
Outdated homeowner’s insurance could leave your family vulnerable. Take action now to align your coverage with your trust.

📞 Contact us today to schedule your Legacy Planning Session and secure seamless protection for your home and family.