Trusts, Trustees and Insurance

Trust structures are now widely used as a tax efficient means of owning property,

and often it is the responsibility of the trustees to ensure that adequate insurance

coverage is in place to protect the assets of the trust. This is quite a complex area of

insurance, and as such, it has become increasingly important to seek specialist

advice. Green Park Insurance Services (GPIS) has developed considerable

expertise in this area, and this article is designed to highlight the main areas that

trustee’s should consider when arranging insurance cover on behalf of their clients’.

The key role of the trustee when arranging the insurance should be to ensure that

there is adequate cover in place to protect the asset in the event of a major loss. To

this end GPIS are able to provide cover with a number of insurers on an unlimited

replacement basis, thereby ensuring that under-insurance would not be a factor in

the event of a major claim, or total loss situation.

It is also essential that the broker involved should be independent, and have a wide

panel of insurers to ensure that competitive premiums can be obtained. To this end,

GPIS have established relationships with 9 insurance companies, 6 of which are able

to provide cover for properties in the majority of worldwide locations, under a single

insurance portfolio. This portfolio arrangement is likely to lead to a further reduction

in insurance costs, alongside providing a far more convenient way of handling the

insurance requirements of the trust.

Another area that requires careful consideration is the relationship between the

trustees and the tenant of the property (which may also be the beneficial owner of the

trust). In the majority of property trust arrangements the trustees are responsible for

the insurance of the buildings, but not the contents of the property (unless of course

they are also assets owned by the trust). Quite often this can lead to confusion, as

the tenant of the property may assume that their contents are also insured, whilst this

falls outside of the responsibilities of the trustees. To provide reassurance to both

parties, GPIS will visit the property and undertake an inventory to ensure that the

coverage would be sufficient to replace the contents in the event of a total loss.

This client visit is also particularly useful when it comes to insuring any improvements

made to the internal fixtures & fittings of the property. The buildings insurance policy

arranged on behalf of the trust will re-instate the building to it’s original condition, but

is not designed to pay for the cost of replacing the expensive improvements that

have been made by the occupier. The responsibility here rests with the tenant, and

this can be very easily insured under the tenant’s improvements section of a contents

insurance policy.

In addition to this, GPIS have developed a number of specialist insurance policies

that are designed to cover properties that are undergoing renovation, and properties

that are empty for more than 30 days at a time. Most insurance policies have a

clause where if the property is empty for more than 30 days, or if works in excess of

£15,000 are being undertaken then insurers have the right to amend the terms of

cover, or cancel the policy with immediate effect.

Please contact us if you would like any further information

Contact – Mike Nightingale GPIS Ltd 07824 530093