Many homeowners risk denied claims by not listing their trust on insurance policies. A simple update can prevent major financial and legal headaches.

A Right on the Money viewer recently sent me an urgent message asking me to cover a very important financial topic. I had just done a story on this earlier this year that she had apparently not seen.

That is a pity because it was the first time I had done an installment with an iceberg, a boat, lightning, and sharks! Oh, and it also included some key information. So, let’s cover it anew and include this woman’s experience.

This is about the possibility that you could have a homeowner’s insurance claim denied if you have put your home in a trust, but haven’t listed that trust as a policyholder. A woman named Angela saw a suggestion about that on social media. As with many posts, she said she and her family “were quite skeptical of the claim until we checked with our own insurance company.”

She said she was informed by her insurer that “my homeowners insurance policy became essentially ineffective when I transferred my home into a trust a year ago. Despite paying premiums faithfully, my insurance company informed me that because the trust wasn’t listed as the policyholder, any claims would be or could be denied.”

So, Angela set about notifying others: “This appears to be a widespread problem that many homeowners are unaware of until it’s too late. We had other friends and family do the same, and the insurance companies have said it’s a really good thing that we called to make this update.”

What you need to know
She also alerted me, and I referred her to my previous story on this.

That story included, in part, this information that I had received from United Policyholders, a consumer education organization that focuses on insurance. They told me that after the recent LA wildfires, some homeowners who created trusts to pass along their property after they die ran into problems getting their damaged or destroyed homes repaired and rebuilt because ‘the trust wasn’t named on their insurance policy.

“If your property is held in a Revocable Trust, the trust should be listed as an ‘additional insured’ on your policy,” the organization told WFAA. “If it isn’t, and you suffer a loss and file a claim, your insurer might deny that claim on the grounds that you don’t have the required ‘insurable interest.’ In that scenario, you would need to fight back and likely have to hire an attorney.”

You don’t want to have to get an attorney for something that can be a fairly easy fix on the front end. In my original story about adding your trust as an insured party on your homeowner policy, I talked to two prominent attorneys. One was the “Death Checklist” attorney we relied upon last year to educate us about wills and trusts, Professor of Law Gerry Beyer.

“This is excellent advice,” Beyer exclaimed, using three exclamation points.

Beyer also added that naming the trust on your insurance policy “is easy and cost-free.”

I got a second opinion from Dallas Attorney Lora Davis, with Davis Stephenson, PLLC. At the time, she was the chair-elect of the State Bar of Texas Real Estate, Probate, & Trust Law Section.

“The owner of the property is the only one who has an insurable interest in the property,” Davis said.

That owner might be your trust.

“That is why it is important that the owner be listed on the…insurance policy,” Davis continued.

If you haven’t seen my previous article on this, it includes a lot more information from these two renowned attorneys and it has much more information from my “Death Checklist” series, which covers the issues you should be addressing while you are alive to make things easier for your loved ones after you are gone.

Making sure your homeowner’s insurance policy has all the right people and entities listed as policyholders applies to that list. But it is also important for you while you are living, just in case your home is damaged or destroyed. I agree with Angela, who wrote: “homeowners need to know NOW, before they face a claim rejection.”

So, please read my original story on this if you haven’t already.

If you have already read (and seen) my prior story earlier this year, I am so glad you got to experience the iceberg, boat, lightning, and sharks – oh, and the valuable information, too.

If you didn’t act on that information before, then hopefully this re-telling might be the reminder you needed to contact your insurer to make certain that everyone who needs to be listed on your homeowner insurance policy – possibly including your trust – is on there.