Understanding Homeowners Insurance in the Context of Selling Your Home
Homeowners insurance is designed to protect your property and home from unforeseen damage and liabilities. By having this safeguard in place, you’re protected from excess financial burden should an incident occur on our property or within your home. As you transition from being somewhere to selling your home, the role of this insurance changes.
When you decide to sell your home, managing all of the moving parts can be stressful, including your homeowners insurance. Many homeowners will have questions and wonder about the right time to cancel their homeowners insurance policy as they make their way through the sale process. In this post, we’ll explore the question of when to cancel your homeowners insurance policy in great detail and provide the answers you’ve been searching for. Read on to learn more and discover how we can help you during the sales process of your home with your homeowners insurance by contacting us. We’ll be happy to help in any way we can.
Why Keep Insurance During the Sale?
You’ll always want to keep your homeowners insurance during the sale process until the sales process is officially completed (i.e.: closed) for your protection. Even if you’ve already moved out of your home, all of your possessions have been removed from the property, and everything is set to be transitioned over to the new owner; you’ll still want to keep your homeowners insurance active. The reasoning behind this is if there are visitors to your home during the sales process and they happen to injure themselves or cause damage to your property prior to completing the sale to the new owners, you’ll be liable. Similarly, if there are any incidents involving natural disasters, theft, or vandalism before the title transfers to the new owner, you’ll be liable for the repair process and making things whole once again prior to completing the sale of the home. If you keep your homeowners insurance policy active as the sales process winds up, you’ll be protected from any of the aforementioned damages or incidents.
Timing the Cancellation
The ideal time to cancel your homeowners insurance policy is after the closing date when the new owners officially take full possession of the property and everything is finalized in terms of the transfer of property. The transfer of ownership is so important, as it transfers liability and responsibility away from you and onto the new owners of your home. Ensuring a smooth transition consists of communicating with all parties involved (real estate agents, new owners, your insurance agent or insurer, etc…) to help transition your home into the hands of new ownership without involving yourself with unnecessary risks and financial burdens should something happen during the sales process. You’ll want to wait until you have written confirmation the sale has indeed closed prior to canceling your homeowners insurance policy.
Coordinating with the Buyer’s Insurance
You’ll want to coordinate with the buyer of your home regarding the insurance transition as well. The buyer of your home will need to have their homeowners insurance policy in place prior to closing on the home to maintain continuous coverage once your policy is cancelled. This overlap is often required of mortgage lenders, so there isn’t a period of time where liability is difficult to determine due to lack of coverage from one or both parties involved.
Communicating with Your Insurance Company
Open, clear communication with your insurance company is key throughout the entire sales process. Notifying your insurance company once you’ve determined your anticipated closing date and asking for their procedures on how to cancel your policy without leaving a gap in coverage is vital. In some cases, insurance companies may provide a pro-rated refund to you for the coverage which won’t be used post-sale of your home.
What About Moving to a New Home?
If you’re selling your existing home and purchasing a new home, you may be able to transfer your policy. This can be a very efficient way to handle your homeowners insurance policy if your current insurer also provides a suitable policy for your new property. You’ll want to discuss this option with your insurance agent to fully understand the specifics and benefits of the new policy.
Special Considerations for Unique Situations
Homes Sold As Part of an Estate
If a home is sold as part of an estate following the owner’s death, the executor of the estate must keep the homeowners insurance policy active until the new owner takes full possession of the home. This situation will require a specific type of insurance policy, commonly known as a vacant home insurance policy, since regular homeowners policies may not provide the full coverage for unoccupied homes.
Rental Properties
If you happen to be selling a home which is currently being rented by tenants, you must maintain the insurance until the lease has transferred to the new owner, or the tenant has fully vacated and the sale has been finalized. In some cases, additional liability coverage may be recommended during this transition period.
Homes Under Construction or Renovation
If a home is under renovation when being sold, a standard homeowner’s policy will likely not cover everything involved. Construction and renovation may increase the risk of damage or injury to property, which in turn requires specific construction related insurance policies to cover all aspects involved.
Choose Portsmouth Atlantic Insurance for Your Homeowners Insurance Needs Today
The decision to cancel your homeowners insurance should only be made after carefully reviewing all risk factors and confirming with all parties involved, in writing, you’re cleared to formally cancel the policy. Through maintaining coverage until the sale is fully completed, you’ll be able to protect yourself from financial and legal consequences should an unforeseen incident occur. You’ll always want to consult with your insurance agent to specifically tailor your actions based on your specific circumstances and to ensure the most seamless transition possible. Through these measures, you’ll be able to move forward with everything and leave your old home with the peace of mind needed to start anew elsewhere.