Homeowner’s insurance follows the title of the real property. If the real estate is in the trust's name, then the homeowner’s insurance also is in the trust's name. Alternatively, if the real estate is in the name of the trust grantor, then the title of the homeowner’s insurance is in the grantor’s name, even though the trust can pay the premiums.
When property transfers into trust, the legal title and ownership of the property change. Traditional underwriting states that the policy is in the name of the legal title owner, which is the trust. Common practice in the insurance industry is that changing title to trust ownership does not increase underwriting risk.
Even though homeowner’s insurance title in trust name is possible if the property is in trust, this may not be a good idea from a liability perspective. Homeowner’s policies provide personal liability coverage only to the named insured and if it is the trust, the residents of the home do not have this extra liability protection.
Underwriting problems can occur if the real estate is in the trust name and the homeowner’s insurance is solely in the name of the homeowner. Since the name on the real estate title and policy are different, issues can arise if there is a property loss. The trust should be the insured or named as an additional insured if the property title is in trust.
Real estate title and trust are complicated matters. It is a good idea to seek the advice of a real estate lawyer regarding if the trust or the individual homeowner should retain property title. The real estate lawyer can work with a homeowner and insurance agent on optimizing homeowner’s insurance based on the property title.