Avoiding the costly mistake that could void your home insurance

The recent Los Angeles fires have left us heartbroken as stories of loss pour in from friends, family and colleagues. But one story in particular caught my attention – not just for the tragedy, but for the warning it holds for homeowners everywhere.

Imagine losing your home in a disaster, only to find out that your insurance won’t pay a dime. Sound impossible? It’s not. It happened to a friend of mine, a real estate agent in Los Angeles, whose insurance claim was denied after his home burned to the ground. The reason? A tiny oversight with devastating consequences: the title of his house didn’t match the name on his insurance policy.

A costly mistake

The home was owned by a family trust, but the insurance policy was under the homeowner’s personal name. Because of this mismatch, the insurer denied the claim.

It’s a nightmare scenario: your home is insured, but because the name on the policy doesn’t match the name on the deed, the payout can be denied. Unfortunately, this kind of mistake is more common than you think – and it’s entirely preventable.

So, here’s the million-dollar question: Does your insurance policy match your deed?

Overlooked risks

Many homeowners don’t realize how easily title and insurance can fall out of sync, especially as life changes. Here are some common scenarios:

• You create a trust: After putting your home into a family trust, you forget to update the insurance policy to name the trust as the insured.

• Title transfers: You add an adult child to the title or pass the home to them entirely but leave the insurance in your name.

• Life changes: A spouse dies, or you get married and add a new spouse to the title – but the insurance doesn’t reflect the updated ownership.

• Occupancy mismatch: The name on the policy matches, but the listed occupant doesn’t live in the home (e.g., your parents own the home in their name but you live there). If the name on your deed and the name on your insurance policy don’t align – or if the occupancy doesn’t match – the insurer could deny your claim.

Checking is your job

Many homeowners assume someone – an escrow officer, bank or insurance agent – is keeping tabs on these details. But the reality is, no one’s connecting the dots for you: Escrow officers check vesting titles during the purchase process, but their job ends after the sale closes.

Banks often don’t care about title mismatches unless it directly affects their loan. In fact, some lenders require you to move the title out of a trust temporarily for a loan, leaving it up to you to fix it later. Insurance agents often don’t dive into the details of title and occupancy unless you bring it up.

It’s on you to make sure everything lines up. The stakes are high: in the event of a disaster, the payout depends on everything matching.

How to protect yourself

The good news? Fixing this problem is easy and often free. Here’s what you should do right now:

• Check your deed: Who holds the title to your home? Is it you personally, a trust or someone else?

• Review your insurance policy: Does the named insured match the titleholder? If your home is in a trust, the trust should be listed on the policy.

• Confirm occupancy status: If the insured name matches the titleholder but the occupant doesn’t (e.g., your parents own the home but you live there), that’s a red flag.

• Ask your agent: Most insurance companies allow you to add additional insureds – like a trust – at possibly no extra cost. Call your agent to update your policy today.

• If you have a loan: Verify that the payout process for claims is clear. Claims checks are often made out to both the named insured and the lender, so everything needs to align.

The Los Angeles fires are a stark reminder that disasters don’t come with warnings. This simple oversight – a mismatch between title and insurance – can leave you vulnerable when you need protection the most. So, take 15 minutes today to check your policy and your deed. If something doesn’t match, fix it. The peace of mind is worth it.

This story is just one of many lessons from the devastating wildfires in California. In future articles, I’ll dive deeper into the challenges facing homeowners, including the growing problem of underinsurance in high-risk areas and what to do if disaster strikes.

For now, let’s not forget the communities still reeling from the fires. Recovery will take months – if not years – and there will be plenty of opportunities to support our neighbors down south.

Don’t let a small mistake cost you your home. Double-check your insurance now, and protect what matters most.