Trustee Insurance
As a trustee, having protection against the cost of lawsuits related to professional errors is critical.
Written by
Christine Lacagnina has written thousands of insurance-based articles for TrustedChoice.com by authoring consumable, understandable content.
Reviewed by
Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.
Trustees are chosen to protect personal or business assets and act in the best interests of the beneficiary. In many cases, trustees are attorneys specializing in trusts, probate, or real estate. Whether your job is to care for a large trust, oversee a property or other physical assets, sit on the board of a foundation, or manage a family trust, you have major responsibilities. As you carry out your duty to protect and serve the interests of beneficiaries and possibly other parties, you must be protected in case you get sued or encounter other disasters as a trustee.
Fortunately, an independent insurance agent in your area can help you find the right trustee insurance. They'll get you matched to the ideal policy with ease. But until then, here's a closer look at trustee indemnity insurance, what it covers, and more.
Why Do I Need Trustee Insurance?
Trustees often find themselves at the center of ongoing conflicts, especially in family trust situations. You may feel as though you're under constant scrutiny from all sides despite your best efforts to work in good faith for the beneficiaries. Any number of disagreements and complaints can result in you getting sued. The only way to protect your personal assets against financial losses due to these lawsuits is with trustee liability insurance.
Why Trustees Must Have Liability Insurance
Trustees act as fiduciaries, meaning they have an obligation to act in the best interests of their beneficiaries. At the same time, they must often deal with challenging accounting, financial, and real estate issues.
Life insurance trustees can sometimes be heavily scrutinized by beneficiaries, other family members, and even third parties. Regardless of whether you're entrusted with a small family trust or a multi-million dollar estate, you can get sued for a variety of reasons, including the following:
- Improper accounting (i.e., the failure to adhere to generally accepted accounting principles)
- Mishandling of assets or investment decisions (e.g., selecting unprofitable or unproductive investments)
- Self-dealing (i.e., the trustee benefits personally from the sale or purchase of trust assets)
- Conflict of interest (e.g., an attorney who is acting as a trustee sells trust property to one of his clients)
- Failure to gain the most favorable tax treatment
Even basic disputes can be extremely costly. In cases of family trusts, lawsuits can carry on for years as family tensions contribute to and are often the cause of disputes. To protect yourself financially as a trustee against the cost of hefty lawsuits, you must be equipped with the right trustee liability insurance.
What Does Trustee Liability Insurance Cover?
Trustee liability insurance is a special form of professional liability insurance. Because trustees can be held accountable for the decisions they make, liability insurance for trustees protects you and your personal assets if you get sued as a result of your professional actions.
In general, professional liability insurance provides financial protection if a client sues you for negligence or another wrongdoing related to your work. Trustees' professional liability policies provide coverage for:
- Actual or alleged errors
- Omissions
- Negligence
- Breach of duty
- Misleading statements
- Claims resulting from the performance of professional services
Your trustee liability insurance should cover attorney fees, court expenses, and any settlements you must pay. An independent insurance agent can help you get equipped with all the trustee liability insurance you need to properly protect yourself against various kinds of lawsuits that may arise.
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The Main Trustee Insurance Options
The coverage limits of your trustee insurance policy, which can be up to $10 million or more, must be adequate for the size and structure of the trust you're responsible for. Most trustee insurance policies are written on a claims-made or claims-made and reported basis, as outlined below.
- Claims-made policy: This covers the trustee for claims made when the policy is in force, regardless of when the alleged error happens. This means that if a claim is made for an incident that occurred before the policy was in force, the policy will provide coverage.
- Claims made and reported policy: This stipulates that a claim must be both made against the trustee and reported to the insurer during the policy's active period to be covered. Thus, claims made for incidents that occurred before a policy was in force would not be covered.
Be sure to talk with your independent insurance agent about finding coverage for accusations of intentional conduct, fraud, and criminal activity, as well as unintentional misappropriation or misallocation of funds.
If you’re an attorney, carefully evaluate your attorney malpractice coverage to determine if that policy covers you when you carry out duties as a trustee. If not, you likely need to get a standalone trustee insurance policy.
Other Business Insurance Considerations for Trustees
As a trustee, you'll likely need several types of insurance to complete your policy rather than just one. You might choose from the following types of business insurance coverage to complete your trustee policy:
- Commercial general liability insurance: This protects you from other types of lawsuits that aren't related to professional errors but rather to third-party claims of bodily injury or personal property damage caused by you or your business.
- Commercial property insurance: This can pay to repair or replace your company property, such as buildings, inventory, or equipment, if it gets stolen, vandalized, lost, destroyed, or damaged by fire, lightning, etc.
- Cyber liability insurance: This can reimburse your business for costs related to cyber-attacks or data breaches that lead to the exposure of sensitive data and information.
- Business interruption insurance: This can provide continued revenue and pay for operating expenses if your business is forced to temporarily suspend operations due to a covered hazard such as a fire.
Your independent insurance agent can help you get set up with every type of business coverage you might need to complete your trustee insurance policy.
How Much Does Trustee Insurance Cost?
The cost of charity trustee insurance and other coverage for trustees can vary based on a number of different factors related to your unique business and operations. The cost of a trustee insurance policy may depend on the following factors:
- The size of the trust
- The structure of the trust
- The amount and type of assets in the trust
- The purpose of the trust
- The beneficiary structure
Your level of experience as a trustee and the depth of your role will also influence the type and amount of coverage you need and how much it will cost. An independent insurance agent can help you find the most affordable trustee insurance near you.
Here's How an Independent Insurance Agent Can Help
Trustee insurance is as complex and important as the trust itself, and you need someone in your corner who can help you find the proper coverage. An independent insurance agent can find insurance companies specializing in covering your professional liability risks and shop and compare multiple trustee insurance quotes and policies for you. They can also help you file business insurance claims or update your coverage when necessary.