If you have transferred your home into a trust, maintaining adequate home insurance remains essential to protect the property and fulfil your responsibilities as a trustee.
Many homeowners assume that if they are also acting as trustees, they can simply continue with their existing home insurance policy. However, this is a critical misunderstanding that could lead to serious legal and financial consequences.
Why Standard Home Insurance May No Longer Apply Property In Trust
When a property is placed in a trust, ownership legally transfers from the individual to the trust itself. While you may still reside in the home and serve as a trustee, you are no longer the legal owner in the eyes of insurers. This change has key implications:
Loss of Insurable Interest: Since you are no longer the legal owner, your personal home insurance policy is no longer valid. The insurable interest now belongs to the Trust, meaning the Trustees must secure an appropriate policy in the Trust’s name.
Trustee Responsibility: The trustees are responsible for protecting the trust’s assets, which includes ensuring that the property is continuously insured. Failure to maintain adequate cover could leave the property unprotected in the event of damage, loss, or liability claims.
Key Steps to Ensure Valid Cover for Property in Trust
To avoid gaps in cover and potential legal complications, trustees should take the following steps:
Arrange Insurance in the Name of the Trust: The policy must reflect the correct ownership structure, listing the trust as the insured party.
Ensure Continuous Cover: Trustees must monitor renewal dates and ensure premium payments are made to prevent policy lapses.
Maintain Updated Contact Information: Insurers must have the correct correspondence address for the Trust and its Trustees, as insurance-related communications should not be sent to the home itself if ownership has changed.
Fulfil Legal Obligations: Maintaining adequate insurance is a fundamental duty of the trustees. Failure to do so could be considered a breach of their fiduciary responsibility, potentially leading to legal consequences.
Protecting Your Home in Trust
Many individuals place their home in a trust to safeguard it against potential future costs, such as long-term care expenses. However, this strategy only remains effective if the property is properly insured under the correct legal framework.
Ensuring the right home insurance policy for a property held in trust is not just a financial precaution—it is an obligation that protects the home, its residents, and the trustees themselves.
By taking the necessary steps to secure and maintain the correct insurance policy, you uphold your duty as a trustee and ensure the continued protection of one of your most valuable assets.
