Family Limited Partnership Question regarding Insurance
Hi,
I have a rental property that is under my family limited partnership but the insurance is under my personal name. Do I need to switch the insurance under the FLP name as well? Can I put an additional name under the policy for the FLP? If I do the transfer will the insurance become commercial? Also I have a mortgage on the property(6 years old) and switched to the FLP over a year ago. Thanks
#1 Insurance Contributor
- Insurance Agent
- Norwalk, CT
VIctor,
There is not a single answer to your question. It depends on the Insurance Company you are using. Each company files their underwriting guidelines with each state insurance dept. They may or may not allow an entity other than an individual or married couple.
If the title of the property is in a family trust, that entity should be the first named insured. If your Insurance carrier won't do that and says they need an individual named with the Trust as an Additional Insured I would be wary. If their guidelines say no to the Family Trust, what happens at claim time when it is shown that the individual does not have ownership of the property and the Family Trust does? Right now, you have a policy that protects a property you do not own. What happens if the Trust is sued?
There are Insurance carriers that will write a 1-4 family that is owned in an LLC, Trust, etc. If your current agent can't, you may want to seek out a couple of Independent agencies that write in that state and see if they can Insure it.
The coverage does not have to be Commercial (Business Owners or Package) policy unless you can't get coverage in the Personal Lines area or if the Commercial offers lower pricing or better coverage.
Lastly, when your agent sends proof of Insurance on your mortgage for a policy with the Family Trust as the named insured, the bank will see that. You may want to make sure they will accept it.