Financial and legal advisers often recommend transferring property ownership to a trust or limited liability company (LLC). Such a move can help establish personal liability protection or provide tax advantages in estate planning.
However, property ownership changes require skilled guidance. Filing the necessary paperwork with an online service will technically get the job done. This approach can also create problems for homeowners and landlords.
Previous articles have addressed red flags in terms of liability protection and claims issues when the deed name doesn’t match the insurance policy. This post reviews additional reasons to include your insurance advisor when making property ownership changes.
Property Ownership & Insurance
Transferring property ownership to a legal entity can offer many advantages. If your financial planner or attorney recommends doing so, check in with your insurance broker. Your policy will likely also need to change, even if only adjusting the policyholder’s name to match the new deed.
Beyond that basic issue, this type of move may require going from one insurance policy to two policies.
For a property with one to four units, a homeowners policy can provide protection if the owner lives in the building. This policy protects the building itself and the owner’s personal belongings. This policy type also includes liability protection for the owner.
Transferring ownership to a legal entity changes things. As mentioned above, the main policy will go under the entity’s name. If the building owner lives on the property, he or she will also need a policy for protection as a tenant. This second policy will cover the owner’s personal property and provide protection against personal liability in a lawsuit.
Every person’s situation is different. As insurance advisors, we don’t advise on the benefits of different ownership types. But we strongly encourage building owners to contact their insurance partner whenever things change with their property.