Most people don’t spend much time thinking about their home insurance—until they need it. If insurance policies were a category in trivia night, they’d probably be grouped with topics like paperclip manufacturing or the rules of competitive yo-yoing. When I mention that I work in insurance, I don’t usually get a flood of burning questions from people eager to pick my brain, like I’m the real-life Jake from State Farm.
However, the recent wildfires in early January have sparked an important conversation: Do you really know what’s in your home insurance policy? More importantly, could a technicality leave you without coverage when you need it most?
Why You Should Care About Your Home Insurance
If disaster strikes, you don’t just want home insurance—you want home insurance that actually works. Yet, many consumers have been trained to focus solely on price rather than coverage, simply because that’s what gets the phone to ring. The truth is, if you ever have to file a claim, the cost of your premium quickly becomes irrelevant.
Like any significant purchase, you should understand exactly what you’re paying for. A good insurance policy isn’t just about having coverage; it’s about having the right coverage. Take time to sit down with your agent and review:
- Your policy limits
- The types of events covered (fire, theft, water damage, etc.)
- Any optional coverages available that may not be included in your standard policy
Even the most conscientious homeowner can run into coverage issues due to an often-overlooked concept called insurable interest—and this is where family trusts come into play.
How Insurable Interest Can Affect Your Coverage
Insurable interest is a fundamental principle of insurance: to insure something, you must own it. You can’t insure your neighbor’s house or your nephew’s Toyota. (On a side note, this is also why you should never co-sign a car loan—but that’s a topic for another day.)
Now, let’s consider family trusts. Many homeowners establish a trust to ensure their property avoids probate after their passing. If you’ve done estate planning, there’s a good chance your home is held in your trust rather than in your personal name.
Here’s where it gets tricky:
- Some insurance carriers require the trust to be listed as the named insured on the policy.
- Others may allow it as an additional insured—but it must be explicitly included somewhere.
If your trust owns your home but isn’t properly listed on your insurance policy, your insurance company could deny your claim—even if you’ve been paying your premiums on time for years.
What You Should Do Next
This is one of many reasons why you should review your home insurance policy annually with an insurance professional. Think of it like a dentist appointment or filing your taxes—not the most exciting task, but critical in the long run.
A quick review could mean the difference between a paid claim and a denied one. So, take a few minutes, check your policy, and make sure your trust is properly listed. It’s a small step that could save you from a massive financial headache down the road.
For additional insurance guidance, contact us today at 818.302.3060 or [email protected].
