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studentcon · June 8, 2016, 11:55 AM

I felt compelled to respond to this old thread because I believe it includes some not-so-great advice.

Although I certainly understand arguments against insurance, one of the posts above somewhat mischaracterizes its benefits. Most understand that the premium that is being paid is for a promise to indemnify (make whole) someone who suffers a loss under the terms of the insurance policy. Yet, the moment you pay a premium you will never get back what you "put into" the insurance. But, that's not the point.

A large safe in a great location can serve well to "insure" your firearms. But not everyone is so lucky. If you live in a high crime area, or don't own a safe, then insurance may be the best way to avoid total loss after a theft. More importantly, you can consider the payments to your insurance policy (much like the investment in a safe) as payments toward the peace of mind knowing that in nearly all cases, your guns are "safe."

As for the advice regarding just "adding yourself as a beneficiary," this is not necessarily correct. The process is a little more nuanced. Without getting into Trust Law 101, the simplest way to explain it is that if you are the sole trustee, you cannot be the sole beneficiary (doing this would effectively end the trust and title to the firearms in the trust would inure to the person named as the trustee/beneficiary). You don't need to do this anyway. If you're a trustee (which you should be if it's "your" trust), then you can insure the trust (and, if you look at the fiduciary duties of trustees in your state, this may be close to a requirement anyway). Either you would have to setup a separate insurance policy, or some insurers will allow you to add the trust as an additional "insured" under your pre-existing property policy (most of which cover guns, up to a specified limit). The reason that you would be able to add the trust to your existing policy is because most NFA trusts are revocable living trusts. Again, without getting into all the details, this is a common scenario and a simple call to your agent asking about this (and getting them a copy of the trust for the underwriting department) can fix your issue.

Remember, when you put a gun into the trust you're splitting title between the trustee (legal title) and the beneficiary (equitable title). You no longer own the gun. Now you own the gun with the beneficiary, except you're holding it in "trust" for the beneficiary per the terms of the trust. (A simplified, but incorrect, way to think about this is that the "trust" owns the gun.) This is why you either have to add the trust as an insured to your policy or setup a separate policy. Your personal policy only covers things you own - therefore, items in the trust are not covered.

Anyway, I hope this post clears some things up and maybe corrects some of the advice given above.

(PS - nothing in this post should be considered offering legal advice.)

June 8, 2016, 11:55 AM	#8
studentcon Junior Member Join Date: June 8, 2016 Posts: 1	I felt compelled to respond to this old thread because I believe it includes some not-so-great advice. Although I certainly understand arguments against insurance, one of the posts above somewhat mischaracterizes its benefits. Most understand that the premium that is being paid is for a promise to indemnify (make whole) someone who suffers a loss under the terms of the insurance policy. Yet, the moment you pay a premium you will never get back what you "put into" the insurance. But, that's not the point. A large safe in a great location can serve well to "insure" your firearms. But not everyone is so lucky. If you live in a high crime area, or don't own a safe, then insurance may be the best way to avoid total loss after a theft. More importantly, you can consider the payments to your insurance policy (much like the investment in a safe) as payments toward the peace of mind knowing that in nearly all cases, your guns are "safe." As for the advice regarding just "adding yourself as a beneficiary," this is not necessarily correct. The process is a little more nuanced. Without getting into Trust Law 101, the simplest way to explain it is that if you are the sole trustee, you cannot be the sole beneficiary (doing this would effectively end the trust and title to the firearms in the trust would inure to the person named as the trustee/beneficiary). You don't need to do this anyway. If you're a trustee (which you should be if it's "your" trust), then you can insure the trust (and, if you look at the fiduciary duties of trustees in your state, this may be close to a requirement anyway). Either you would have to setup a separate insurance policy, or some insurers will allow you to add the trust as an additional "insured" under your pre-existing property policy (most of which cover guns, up to a specified limit). The reason that you would be able to add the trust to your existing policy is because most NFA trusts are revocable living trusts. Again, without getting into all the details, this is a common scenario and a simple call to your agent asking about this (and getting them a copy of the trust for the underwriting department) can fix your issue. Remember, when you put a gun into the trust you're splitting title between the trustee (legal title) and the beneficiary (equitable title). You no longer own the gun. Now you own the gun with the beneficiary, except you're holding it in "trust" for the beneficiary per the terms of the trust. (A simplified, but incorrect, way to think about this is that the "trust" owns the gun.) This is why you either have to add the trust as an insured to your policy or setup a separate policy. Your personal policy only covers things you own - therefore, items in the trust are not covered. Anyway, I hope this post clears some things up and maybe corrects some of the advice given above. (PS - nothing in this post should be considered offering legal advice.)