Protect Your Assets: Why and How to Update Insurance for Trusts and LLCs

R. Todd Frahm

March 28, 2024

In the evolving landscape of real estate and asset protection, understanding the importance of updating insurance coverage after transferring real property into a trust or an LLC is crucial. This measure is vital to ensuring that your assets remain safeguarded against unforeseen circumstances, such as natural disasters, accidents, or liability claims. The necessity of this step has been underscored by recent developments, especially with insurance companies reconsidering their presence in California.

Why Updating Your Insurance is Crucial

When ownership of real property shifts to a trust or LLC, the insurance policy must be revised to reflect this change accurately. This update ensures that your property is comprehensively protected, securing your assets against potential risks. The departure of insurers from the California market, driven by regulatory challenges, rising costs, and adverse conditions, emphasizes the need for prompt action. Such exits could disrupt coverage, alter premiums, or complicate the search for alternative insurance providers.

Steps to Ensure Adequate Coverage

Following the transfer of real property to a trust or LLC, it is recommended to:

• Inform your insurer about the change in ownership. Check if this adjustment requires any modifications to your policy, particularly concerning casualty and liability insurance.

• Consider adding the trust or LLC as an additional insured on your policy for more comprehensive coverage.

• Homeowners should notify their title insurer of the trust, investigating whether their policy needs an endorsement. It's advisable to obtain written confirmation if no further action is deemed necessary.

• For LLC transfers, it's essential to ensure the insurance company acknowledges the LLC as the property owner, with you listed as an additional insured, to protect your interests adequately.

How We Can Help

While navigating insurance coverage updates for trusts and LLCs can seem daunting, it is a critical step in asset protection. Should you have questions or need assistance with updating your insurance policies or any other estate planning matters, remember that professional guidance is available. Being proactive in these efforts not only mitigates risks but also ensures that your assets are well-protected for the future.

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