Investor · Panama City, FL · Member since 2016 · 10 posts · 1 vote
I would like to hear from any knowledgeable members who a solo 401K trust. My question is how did obtain liability insurance on rental properties that the trust owns? Also can the Trust be sued for issues that arise from renting?
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
10y
@Allan Gibson a commercial policy can be set up with the Trust as the "Named Insured". Also, most commercial policies will also defend the owner of any Named Insured. Meaning, if you are named personally in a suit in regards to that property, the policy will defend you if you are the owner of the Trust.
You can also add your personal name as a second Named Insured.
Lastely, if you put both the trust and you name on the policy, list the Trust first so it is the name that shows up on all invoices, certificates, etc.
Insurance can be titled in your name as trustee of the solo 401k plan (for example, if the plan name is Chargers Solo 401k trust, one way title can be taken is as follows: Allan Gibson, Trustee of Chargers Solo 401k Trust). The insurance proceeds are paid with solo 401k funds.
You need to obtain a commercial or trust policy. This should be a separate policy for the plan, not tacked onto your personal insurance. Not all insurers write such policies. There are some reputable providers who focus on real estate investor policies that participate here on BP.
As the property owner, the 401k trust is the insured entity, and could be sued just as any other property owner/landlord.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
10y
Allan, if you are buying a rental property in your Solo 401k - you should simply purchase a landlord policy, which comes with the liability insurance coverage. As Mark mentioned you, as the trustee, can obtain insurance in your name if the insurance company refuses to issue a policy using the name of the trust. I'll email you some additional info regarding this.
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
10y
@Allan Gibson a commercial policy can be set up with the Trust as the "Named Insured". Also, most commercial policies will also defend the owner of any Named Insured. Meaning, if you are named personally in a suit in regards to that property, the policy will defend you if you are the owner of the Trust.
You can also add your personal name as a second Named Insured.
Lastely, if you put both the trust and you name on the policy, list the Trust first so it is the name that shows up on all invoices, certificates, etc.
Investor · Panama City, FL · Member since 2016 · 10 posts · 1 vote
10y
Currently my State Farm agent could not get Citizens to write it in my name with the trust as others insured or vise versa. Can someone point me to a company that will write the policy in my name with trust as others insured?
I am trying to insure my rental property investment bought in a solo 401k trust. The county in FL requires the title in the format John Doe, Trustee ABC Trust. The insurance company, however, does not want to write the policy in that name, they say it can only be in the name of John Doe, with the Trust as the additional insured. They ask that the Trust is the co-applicant for the insurance and John Doe is the main applicant. When I asked how claims will be paid, they say that by default it will be paid to John Doe, but I could talk to the adjuster at the time and maybe get the check in the name of the trust. They say the 401k trust is not like a regular family trust, so they have to do it this way.
Is this normal market practice? I don't want to keep paying premiums and then they pull some legal technicality and not pay the claim in event of a loss.
Does anyone know any agent who insures solo 401k trust properties in FL? Thanks.
Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
4y
Talk to the company who drew up your Solo401k. They know how insurance claims are paid. You could have named your Solo401k anything. It didn’t need to be in your name.
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
4y
Allan,
I echo Jason Bott's advise. Look for an Independent Insurance Agent (represents multiple companies) that writes Commercial Insurance. I know for my clients I have written policies under a 401k Trust as the named insured in our area.
I would be wary of a policy that can not be issued in the Name of the Trust and has to have the Trustee as the insured. If their underwriting does not allow it, will there be a problem at claim time. Carriers are leaving FL or reducing what they write so I would also discuss the long term outlook with the agent.
@Dmitriy Fomichenko thanks, the insurance agents are proposing the trustee (me) as the insured and the trust as additional insured, , in the event of a claim have you seen any issues in the claim being paid to the trust, instead of the trustee name? The bank account is in the trust name, and. the claim check should be made in the name of the trust, right? In this arrangement, the claim will be paid to me, the trustee, or the insurance company may not pay at all.
Insurance company will pay the claim. Event if they issue a check to you as the trustee you can deposit that check to the trust account, no problems there.