The Best Ways to Avoid Paying Your Auto or Home Deductible….

Some Minnesotan's  seldom if ever have claims under their auto and home policies. Others seem to live under a “dark cloud” and have frequent auto accidents and/or property damage to their home and personal possessions. It is just bad luck? Being in the wrong place at the wrong time?  Certainly some loss events are going to happen no matter what; but, there are things you can do to avoid most claims.

Some are obvious such as not texting while driving; but, there are many “loss control” actions that most of us can take that will reduce the likelihood of a loss or limit the severity of a loss. For example:

Auto

-          Avoid high risk situations. Instead of driving on New Year’s Eve or taking your car to the Gopher game, take public transportation or catch a ride with someone else. You car is much less likely to suffer damage if it’s parked in your garage.

-          Be cool. It is NOT worth possible injury or thousands of dollars in damage to engage in one-upmanship on the road. And, if your kids are in the car, it’s a great teachable moment to show them that responsible drivers don’t take the bait and engage aggressive drivers.  

-          Maintain your car. Are your tires in good condition and properly inflated? Is the car mechanically sound?  Breakdowns put you and your car at greater risk.

-          Anticipate. That car with plywood strapped to its roof might lose its load; are you too close to avoid trouble?  Traffic is congested and you’re approaching an interchange with other roads; someone will make a sudden lane change and/or hit their brakes. Look for situations that can create hazards and be ready.

Homeowner:

-          Maintain your home. Shingles wear out or can be blown off, and caulking will deteriorate resulting in water damage.  Make it a point to inspect your home frequently to check for leakage or other deterioration or damage. Fixing such problems prevents or at least reduces damage.

-          Avoid exposures. Do you have jewelry or other valuable items that you seldom wear or use? Why not keep those in your safety deposit box?  

-          Don’t advertise absences from your home. You can stop and re-start mail delivery at the post office’s website. Keep the grass trimmed. Get a friend and/or neighbor to keep an eye on your home. Some police departments request that you let them know if you’re leaving town so they can contact you if there’s a problem.

Auto and home insurance are there to protect you from severe financial loss when accidents occur; but avoiding the loss in the first place is always the better option. 

Residence Held in Trust

Transferring ownership of your home to a trust or some other similar entity has become a common estate planning technique. I'm told that it may provide protection from creditors, facilitate gifting, and/or provide for management of property owned by multiple individuals or families. I'll leave it to the attorneys and estate planners to explain all that.

It can also create an issue with your homeowners insurance that needs to be addressed.

Consider this scenario: Ownership of your home has been transferred into a trust. Chances are your homeowner policy still shows you as the insured on the policy. After the house burns down, the adjuster shows up with the big check to pay for rebuilding the home and asks to see the title. And, now we just might have a problem.  It seems that the policy covers the residence premises of the insured, which is you. The problem is that you don't own the house; the trust owns it. Insurance companies tend not to pay people for houses they don't own.

OK, so we put the house in the name of the Trust.  First of all, eligibility for homeowner policies generally is limited to people  who own and occupy a home,(not an artificial entity like a trust). But let's assume you get the insurer to list the trust as the insured.  The house burns down, the insurer pays the trust to rebuild the house, and we're ok, right?  Not quite. The problem now is that the contents of the house probably do NOT belong to the trust. The insurer will have a problem paying you for your contents when you are not the insured on the policy.

By this point, you're probably saying, "so list the individuals AND the trust as insureds. That is the solution that would seem to resolve the problems and some insurance companies (but not all) have now written endorsements to their homeowner policies to accomplish that.

The points to take from this blog are:

1.  Even if you have deeded your home to a trust, YOU should be listed as the named insured on your homeowner policy.

2. The trust should be added as an "additional insured" as respects their specific exposures.

3.  Make sure you work with an insurance agent who understands the issues and has the insurance companies that can meet your need as the resident of a residence held in trust