High-net-worth individuals are increasingly moving homes, rental properties and other valuable assets into LLCs and Trusts. Financial advisors and attorneys often recommend these structures as a smart estate-planning strategy that’s designed to simplify generational transfers, provide tax flexibility, protect assets and preserve privacy for families with significant wealth or public profiles.
Restructuring Your Assets Can Affect Available Insurance Options
While the legal and financial benefits are clear, one critical element is often overlooked: insurance. The way an asset is titled, as well as the owners and beneficiaries associated with it, can influence how that asset is protected and insured. In some cases, the structure of ownership determines whether a property qualifies for personal lines coverage or must be moved to commercial or specialty insurance, which may come with higher premiums or fewer coverage options. This is where well-intentioned estate planning decisions can quietly create greater risk.
When assets are placed or transferred into an LLC or Trust, insurance carriers typically require additional information to assess the exposure. They want to understand the entity’s structure, including:
- who the beneficial owners are
- if the entity generates income
- if the entity owns any other real estate or other tangible assets
- if the entity has any employees
- if there are business operations on the property or if the entity has any other business operations
These details matter because personal insurance products are designed for specific types of ownership and use. If a property is titled to an LLC or Trust but the policy does not properly insure that entity, the coverage may no longer be valid. This can leave the LLC or Trust exposed where a claim could be denied in the event of a loss.”
Who Owns What?
Property ownership is one of the first issues that can trigger complications. Personal lines products are designed for entities owned by an individual, a married couple or family members. Challenges arise when unrelated business partners or multiple principals own a property together. A vacation home, for example, may feel like a personal asset, but if it is owned by two business partners through an LLC, that structure can push the property outside the scope of standard personal insurance. The home may still be insurable but often only through a specialty carrier or on a commercial policy.
Is Your Property Used for Business?
A property that appears residential can become problematic if any part of it is used for business purposes. An outbuilding converted into an office or a company’s storage tied to a commercial operation can change the risk profile. If multiple properties are held under the same LLC, a single business exposure can make all assets under that entity ineligible for personal lines. What began as straightforward estate planning suddenly requires a wholesale shift in how the entire portfolio is insured.
These issues are not uncommon. Consider a client who owned several rental properties that had long been insured under a personal landlord policy. Acting on advice regarding asset protection and tax planning, the properties were transferred into a single LLC. But because one location also had a business exposure, the entire group of properties tied to that LLC became ineligible for personal coverage. The solution was to move everything into commercial insurance. While coverage remained available, the outcome was not what the client expected, and it could likely have been avoided with advance planning.
How Umbrella Coverage Is Impacted
Umbrella liability insurance can create an unexpected coverage gap when properties are titled in an LLC. Some carriers will insure the LLC-owned property on a homeowners or landlord policy but will not extend umbrella coverage over it, treating the LLC as a business exposure. This creates a serious coverage gap: a client may believe they have excess liability protection when the umbrella coverage may not respond to a liability claim. When this happens, the only solution is often to move the entire account to a carrier that will insure both the primary policy and umbrella layers consistently, ensuring true liability protection
The Need for Collaboration with Your Insurance Broker
While LLCs and Trusts are the right tools for estate planning, tax strategy, asset protection and privacy, these structural decisions must also account for insurance. Attorneys, CPAs and Financial Advisors each bring essential expertise to the table, but insurance is the mechanism that ultimately protects the assets being structured. If that perspective is missing, clients may unknowingly create coverage gaps or end up in less favorable insurance programs.
Before assets are transferred, retitled or restructured, your insurance advisor should be part of the conversation. With advanced insight, they can identify where a proposed structure may affect eligibility, recommend adjustments, such as separating exposures into different entities and confirm that liability coverage, including umbrella protection, will protect the assets as intended.
Contact HWP
LLCs and Trusts can be powerful tools in protecting assets but only when they are aligned with the insurance program that protects them. Giving your insurance advisor a seat at the table ensures that financial strategy and risk protection move together.
HWP is a leading insurance agency dedicated to providing customized solutions for successful individuals and families. By understanding your goals, we can structure tailored insurance solutions that support both your financial priorities and your lifestyle. With a strong presence in Washington, D.C., Annapolis and Southern Maryland, we offer guidance to protect what matters most. Learn more at hwphillips.com.
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