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Ramifications to Insurance When Property is Deeded to a Business

InsuranceProperty is moved into a company by simply deeding the property from the owner to the company. You should always use a warranty deed when moving property to a company, but that’s another story.

What happens to the property and casualty insurance when property is moved into a company? Moving property often occurs as part of an asset protection plan or an estate tax plan. It really doesn’t matter what form the company takes (partnership, limited partnership, family limited partnership, LLC, or corporation), the results will basically be the same.

When you bought the insurance (fire, theft, flood or whatever), you owned the property in your name, and the policy was made out in your name. You were the owner. The policy was for an individual owner or an individual investment property-assuming the property is an investment property. When the property is transferred to a company, suddenly it isn’t owned by an individual any more. It is owned by a company. It is now a commercial property.

Individual policies to do not cover commercial properties. Commercial properties cost several times what an individual policy costs. When the fire burns down the property, the insurance company will always check to see who the owner is and whether or not they have the right owner and property before they pay a claim.

Funny thing! If the owner on the policy and the owner on the title to the property don’t match up, the insurance company doesn’t pay the claim. BEWARE!

It is possible to get the insurance company to approve transfer into an entity and keep the same policy in place. If the owner is a single individual and the company is owned solely by the same individual, your chances of approval are quite high. I’ll guess, from my limited experience, about 80%. If the owners of the company are different in any degree from the owners of the property before it is transferred to the company, chances are slim the policy will be allowed to be carried over to the new company owner.

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