Placing your home in a Revocable Trust is a smart estate planning move, but it can create unexpected complications with your property insurance coverage if not handled properly. A major issue homeowners face is that while their home is legally owned by the trust, their insurance policy does not list the trust as an insured party—potentially leading to a claim denial when disaster strikes.
Recent disasters, such as the California wildfires, have put a spotlight on this problem. Homeowners who lost their properties found that because their trust was not properly named in their insurance policy, insurers denied coverage, arguing that the trust lacked an "insurable interest." The same risk applies here in Florida, where hurricanes, floods, and other perils can cause significant damage.
If your home or rental property is held in a Revocable Trust, take proactive steps to ensure that your insurance coverage aligns with your legal ownership structure.
Including your trust as an additional insured has multiple benefits:
Prevents claim denials due to lack of an insurable interest
Protects both your personal and trust’s interests in the property
Ensures insurance proceeds are paid directly to the rightful party and do not have to go through probate
Maintains the integrity of your estate plan and avoids unnecessary legal headaches
Florida homeowners face additional challenges due to the state's complex property insurance market and frequent insurer insolvencies. Policyholders should be extra vigilant in ensuring their coverage is structured correctly, especially when dealing with insurers that may be tightening their claim approval processes.
If your home is in a trust, act now to ensure your insurance policy reflects that reality. A small paperwork adjustment today can save you years of legal battles and thousands of dollars in denied claims later. Contact your insurer, update your policy, and protect your estate and loved ones.