Can You Get Insurance with a Lady Bird Deed? – Asset Protection

Yes, you can obtain insurance on a property that is subject to a Lady Bird Deed (also known as an enhanced life estate deed). A Lady Bird Deed allows the property owner to retain full control and use of the property during their lifetime, including the ability to obtain and maintain insurance coverage. Here’s how it works:

Homeowner’s Insurance

1. Continued Coverage: The property owner retains the right to obtain and maintain homeowner’s insurance on the property. Since the owner retains control and use of the property during their lifetime, they are considered the insured party for purposes of the homeowner’s insurance policy.
2. Policy Holder: The grantor (the current owner) continues to be the named policyholder on the insurance policy. This ensures that the property remains protected against risks such as fire, theft, and natural disasters.
3. Beneficiary Considerations: The named beneficiaries (remaindermen) of the Lady Bird Deed do not have any ownership interest in the property until the death of the grantor. Therefore, they are not typically involved in the insurance policy during the grantor’s lifetime.

Title Insurance

1. Title Insurance During Lifetime: The property owner can obtain and maintain title insurance to protect against any defects in the title. This insurance is important for ensuring clear ownership and addressing any title issues that may arise.
2. Transfer Upon Death: Upon the death of the grantor, the property automatically transfers to the named beneficiaries without going through probate. The title insurance policy remains in effect as long as it was issued while the grantor owned the property. Beneficiaries should consider updating or obtaining a new title insurance policy to reflect their new ownership.

Liability Insurance

1. Personal Liability: The property owner can maintain liability insurance as part of their homeowner’s policy. This coverage protects the owner from claims of bodily injury or property damage that occur on the property.
2. Beneficiaries’ Liability: After the grantor’s death, the beneficiaries who inherit the property should ensure that they obtain their own liability insurance coverage as new property owners.

Considerations for Beneficiaries

1. Insurance Update: After the grantor’s death and the automatic transfer of property, the new owners (beneficiaries) should promptly update the insurance policies to reflect the change in ownership. This includes updating homeowner’s, title, and liability insurance to ensure continuous coverage.
2. Consulting an Insurance Agent: Beneficiaries should consult with an insurance agent to understand their coverage needs and ensure that they are adequately protected as the new owners of the property.

Conclusion

A Lady Bird Deed does not prevent the property owner from obtaining and maintaining various types of insurance coverage, including homeowner’s insurance, title insurance, and liability insurance. The grantor retains full control over the property during their lifetime, which includes managing and updating insurance policies. After the grantor’s death, the beneficiaries should update the insurance policies to reflect their new ownership to ensure continuous and adequate coverage. Consulting with an insurance agent can help both the grantor and beneficiaries understand their insurance needs and maintain proper protection for the property.

About the Author

I’m an attorney who specializes in asset protection planning. I graduated with honors from Emory University Law School and have been practicing law for almost 15 years.

I have helped thousands of clients protect their assets from creditors. Before private practice, I represented the federal government while working for the IRS Office of Chief Counsel.