Land Trust - who should be named on the insurance policy?

14 Replies

Hi Folks

Need your help please. 

On an investment property that's rented out, who is the owner of the insurance policy?

The structure of ownership is as follows:

Title to the home taken in the name of the land trust. So the title says something like '123 main st trust, John Smith trustee"

The beneficiary is a LLC.

The holding entity that owns the LLC is a Family Limited Partnership.

So there are three entities that flow down in ownership top to bottom. 

When taking an insurance policy out - who is named on the policy documents ? 

How is the policy written ? 

Thanks 

From what I understand, the biggest issue is who's name is on the mortgage if it is financed.  If an individual got the mortgage and then transferred it to the trust, then the insurance needs to be in the individual's name with the lender as the beneficiary.  If the property is owned free and clear, I don't think it matters.  I think it would make the most sense if the entity on the insurance is the entity that is receiving income from the property.

Thank you kindly for the reply.  Property is owned free and clear, no mortgage.  

This is all about being protected in the event of a claim by a tenant or someone visiting or working on the property.  

Based on this, who should be named on the policy ? Who should be the additional insured please ? 

The insured is the title holder, regardless of whether there is a mortgage.  No one other than the title holder, or mortgagee, has an insurable interest in the property, as far as I know.  I'm open to correction by an insurance person.

Ask your insurance agent.

Thanks Nate 

I find that as i learn more about investing its wiser to actually understand things yourself. 

People (even professionals) will give you their best advice but it won't necessarily be correct.  

I find that the collective wisdom of the group tends to be more accurate and cover more aspects than the viewpoint of one person.  

Anyone care to share if they use a similar structure and how they insured it please ? 

Account Closed the first named Insured (name the policy is taken out under) should be the entity that is holding deed/title.  

Most commercial insurance policies will have language in the "named Insured" section stating that any "owner" of the named Insured is also considered a named Insured on the policy.  Meant to respond to a suit brought in the personal name of a person who owns the llc, trust, etc. in you case, it includes your other holding entities.

That being said, it is still good practice to add all entities involved in you asset protection structure on the policy.  

The only resistance you may run into is if your other holding company holds many other entities not part of this policy.  In this case, the underwriters fear is that one of the holding entities will be pulled into court on a property not on this policy.  Resulting in defense cost for a policy they never collected any premium for.  The way around this is consolidating insurance policies and purchasing a larger umbrella policy.

Awesome response Jason! Thanks. 

So basically I take the insurance out in the trust name and then the additional insured would be the LLC.

I assume I don't need to add in the FLP as an insured as it would be only a holding corporation. The LLC is the beneficiary and the one ultimately liable. Is that correct ? Or would you add the FLP as well?

Lastly , some people say not to have your personal name on there as an additional insured and some say that it is good to do so. What are your thoughts on that? 

Would you mind explaining the rationale for doing / not that ? 

Account Closed there is not a need to add your personal name on the policy IF the policy language states you are personally included as a named Insured as the owner of the LLC.

For the insurance comapanies I represent, they already include this policy language.  But given BP is nationwide, everyone should check with your agent on the specific language on thier policy as coverages can be different from coast to coast.

@Jason Bott thank you sir!

I will check if the policy states that. 

Last question I promise!!

Is there any risk to adding myself as an additional insured ? Even if the policy states the above?

This way I would have the trust, llc and my personal name. 

Would there be a reason not to do this?

Hi Rudi,

I'm also researching this, perfect timing! Hopefully we can sort this out together. My lawyer recommended the land trust setup as named insured, beneficiary as loss payee, and the llc and myself as additionally insured.  He specifically recommended that structure, but like you, I'm trying to understand exactly what it means. Admittedly adding my name as "additionally insured" didn't jump out as something risky, but I don't completely understand it just yet.

thanks Jeremy! What is a loss payee? I would have thought the llc was the beneficiary?

The reason I ask about being named personally on the policy is that I read somewhere that it could make you liable in some way. It may be wrong and I don't have the post to review. Just something that triggered my thinking. 

There's not that much info online regarding this surprisingly. 

Account Closed no issue adding your personal name from an insurance perspective.

Thank you sir!

I'm going to keep the trust as the listed insured and then llc and me as additional.  

Appreciate the clarification 

Yes, the loss payee appears to just be another name for the beneficiary.  There's a wiki link on the topic, but it didn't help me understand it in the context of my situation.

My insurance guy indicates it (additionally insured) just extends the coverage to them - doesn't seem to be any added liability, just added protection. So, this seems to be the best technique for us at this point.  

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