When to Cancel Homeowners Insurance When Selling a House

When you’re preparing to sell your home, your to-do list is probably already a mile long. And one of the things you’ll have to add to the list is canceling your homeowners insurance on your current home.

But, you might find yourself wondering when to cancel homeowners insurance when selling a house. We’ll answer that question in this Redfin article, along with how to cancel it, how your policy changes, and more.

When do you need to cancel your home insurance when selling?

When selling a house, your homeowners insurance policy should stay in place until the buyer officially owns your home. Keeping the necessary coverage on your home until closing ensures the property stays protected in the event of losses or damage to the home.

Just to be safe, it’s best not to cancel your insurance until after the closing takes place. If you call beforehand to cancel, and then the closing falls through, you could find yourself without coverage during a time you still need it.

Why you should keep homeowners insurance while selling your house

Your homeowners insurance protects you in case anything happens to your home (or in your home). It pays for repairs caused by covered incidents and can fully replace your home in the event of a total loss. Here are the homeowners insurance coverages you may need before you officially close on the sale of your home:

• Liability coverage: Your liability coverage applies if you or a member of your household is legally responsible for bodily injury or property damage to another person. For example, it would apply if someone was injured while visiting your home.
• Dwelling coverage: This part of your homeowners insurance covers the home itself. It will cover the cost of repairing or replacing your home and attached structures caused by a covered peril such as fire, windstorm, vandalism and more.
• Contents coverage: This coverage – also known as personal property coverage – applies to the belongings within your home. If you have a fire, the dwelling coverage would cover your home. But your contents coverage would cover what’s in your home.
• Loss of use coverage: As you can imagine, some major homeowners insurance claims could prevent you from being in your home during repairs. In that case, your loss-of-use coverage would pay for your expenses during that time.
• Other structures: Remember that when someone buys your home, they aren’t just buying the home itself. They’re also buying the yard and other structures on the property. This part of your policy would cover detached garages, sheds and other structures.

When you’re selling your home, homeowners insurance can be even more important. You are likely to have people in and out of your home for home inspections, private house showings, and public open houses. A simple accident could result in damage to your home or an injury to another person.

And remember, it can take a long time to close on a home in some cases. While you wait for the closing, you still own and live in the home. It’s important not to think of the home as the new buyer’s problem. After all, if something goes wrong, a buyer may pull their offer.

Does it matter if your home is occupied or vacant?

You should keep your homeowners insurance in place regardless of whether you’ll be living in the home or it will be sitting vacant. Ultimately, you’re still responsible for the home.

If it’s damaged or destroyed before a new buyer officially closes on it, it’s up to you to repair or replace it. And if you don’t have insurance, you’ll be paying out of your own pocket to do that. Additionally, people will still be visiting your home for showings, inspections and more, which opens you up to liability regardless of whether you’re living there.

How to cancel your home insurance policy

Canceling your homeowners insurance policy is a relatively straightforward process. In most cases, you can simply call your insurer and let them know you’d like to cancel your policy. Remember, you won’t want to do this until you’ve officially closed on the home and someone else owns it.

Depending on the insurance company, you may need to complete a short form and let the company know why you’re canceling, but it shouldn’t be a difficult process. In most cases, you’ll be able to cancel the policy effective the same day you’re calling.

It’s worth noting that in some cases, you may be subject to a cancellation fee. However, fees are rare and usually only apply if you have a small insurer or are canceling your policy shortly after opening it in the first place.

Home insurance refunds when canceling a policy

In most cases, homeowners insurance premiums are paid upfront for the entire year, often as a part of your escrow payment. If you’ve already paid for a year of insurance coverage, you can expect to get a refund from your insurance company. This refund will be prorated, so you’ll only end up paying for coverage for the time you actually had the policy. For example, if you’ve paid for a year upfront and sell the house 6 months later, you’ll get half your premium back.

What you need to get a new home insurance policy

If you’re buying a new home, you’ll need to get homeowners insurance coverage for that house. When shopping for homeowners insurance, you may decide to simply stick with the same insurer, especially if you have other policies with that company or have a long-standing relationship with your insurance agent.

However, you may decide to shop around and get quotes from multiple policies. It’s possible the company you chose for your old house doesn’t offer the cheapest premiums for your new home.

Remember that depending on when you sell your old home versus buy your new one, there may be a bit of time when you have two homeowners insurance policies at once. While it may feel redundant to pay for two policies at once, it’s critical that you have coverage for both homes.

How your home insurance policy changes when you move

If you’re in the process of moving out of your home, there are a few things you’ll need to consider when it comes to your homeowners insurance coverage.

Does home insurance cover damage from moving?

First, you should check with your homeowners insurance company to find out if your policy covers damage caused by moving.

A policy may not cover damage caused by the movers as they’re moving belongings out of the home. Additionally, it may not cover damage to your personal belongings if they’ve already been moved onto the truck or are in transit to your new home.

There are other situations where homeowners insurance would apply. For example, if someone you’ve hired to help you move stole something from your home, it should be covered by your policy, as most homeowners insurance policies cover theft.

Ultimately, it depends on your policy whether and what damages are covered during a move. You can proactively contact your insurance agent to find out.

Does homeowners insurance cover a vacant home?

You must also find out if your homeowners insurance will apply once you move out of the house. Some insurance policies aren’t designed to cover vacant homes, especially if it’s been a month or more since you moved out.

Make sure to call your insurance company, let them know how long the house will sit vacant, and find out whether your policy will work or whether you’ll need to purchase a different coverage for that period.

FAQs on canceling homeowners insurance after a sale

Are you preparing to sell your home? Here are some more things you may want to know about canceling your homeowners insurance after a sale.

Can you change home insurance after closing?

You can usually switch homeowners insurance at any time. If you’ve purchased a new home and have already signed up and paid for your home insurance policy, you can typically get a refund if you decide to switch. However, you may be subject to a fee.

Can I transfer my existing homeowners insurance policy to a new property?

You generally can’t transfer an existing homeowners insurance policy from one insurer to another. Instead, you could simply sign up for a new policy with the same insurance company.

When do I get home insurance when buying a house?

You should have homeowners insurance during the entire time you own a home. If you’re buying a new home, you should set up your insurance to be effective from the time you close on the home. And if you’re selling, you should make sure not to cancel your policy until after the closing.

Can I cancel my home insurance policy at any time?

Technically, you can cancel your home insurance policy at any time. However, mortgage lenders require that borrowers maintain homeowners insurance for as long as they have a mortgage. And it’s generally in your best interest to have homeowners insurance, regardless of whether you have a mortgage.

The bottom line: Keep your house protected at all times with homeowners insurance

Canceling your homeowners insurance is just another thing you’ll have to add to your to-do list when you’re preparing to sell a home. The good news is that it’s a quick and easy process. You can often cancel your policy over the phone or by filling out a short form. And the cancellation can usually be effective immediately.

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