insurance

When my home held in a trust caught fire, my home insurance let me down. Why?

Jack HungelmannDear Insurance Adviser,
My attorney told me to transfer ownership of my house to a trust, for tax reasons. I didn't make any changes to my home insurance policy, so it remained in my name only. Recently, we had an electrical fire, and two rooms were heavily damaged. My insurance company says it will pay me for our belongings in the rooms but not for the structural damage, because -- technically -- I no longer own the home itself. Is this right? What do I do?
-- Fred

Inspector in home after fire damage © iStock

Dear Fred,
Be grateful damage was confined to two rooms. If the house had burned totally to the ground, the problem would be much worse.

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When you transferred ownership of your home to a trust but failed to add the trust as an insured party, you took away your personal insurance in the structure. Why? Because you no longer have any insurable interest in the structure.

When homeownership is transferred to a trust, the trust should be added as a co-named insured on the home insurance policy and any umbrella policy. The trust has ownership in the home and, as a homeowner, is suable for injuries occurring on the premises.

Here's my advice for you:

  • Hire a good attorney.
  • Hope that you are the trustee of the trust.
  • If you are, then present an argument that, as trustee of the trust and the insured on the policy, you are entitled to the proceeds for structural damage, on behalf of the trust.

Good luck.

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