How does homeowners insurance work when selling a house?
To ensure that you and your home are properly protected while you technically still own the property, wait until the closing has officially finalized before canceling your homeowners insurance policy. Plan to have your policy cancelled on the date the sale closes.
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Key takeaways
Keep your homeowners insurance policy active on the house you're selling until closing
Contact your insurer or agent to cancel your policy on the date that the buyer takes ownership of the home
When to cancel homeowners insurance when selling a house
The home you sell is considered yours until the closing process is finalized. At closing, once the buyer officially owns the home, you can cancel your policy. Until that time, your homeowners insurance policy should remain in place to provide protection should anything happen to the home during the closing process.
What documentation is needed to cancel homeowners insurance after the sale of the home?
Once the closing process is finalized, contact your agent or insurer to cancel your homeowners policy. They may require some documentation to cancel the policy before the policy period ends, including:
- A written cancellation request
- Closing statements
- Proof of sale/transfer of ownership
- Current homeowners policy information
Keep in mind that you might also need to inform your lender about insurance changes/cancellation if your home is in escrow.
What happens if you sell your house before the policy expires?
If the sale of your home is complete before your policy expires, contact your homeowners insurer to end the policy early. There is typically no fee for ending a homeowners policy before the expiration date.
Why should you keep homeowners insurance while selling your home?
Repairs: If you cancel homeowners insurance too early, any damages incurred won't be covered, and you'll need to pay the repairs out of pocket. Moreover, a buyer could back out of the purchase at any time before the home closing process.
Temporarily owning two homes: If you temporarily own two homes (e.g., you buy a new home before you finalize the closing on your old home), you'll need to maintain two insurance policies until the old home has been sold. Though the policies may overlap, keep both homes properly insured while you're the owner of both.
Can you transfer an existing homeowners insurance policy to a new property?
Homeowners insurance can't be transferred from one property to another. Your lender will typically require you get a homeowners insurance policy for your new home for the mortgage can be finalized.
Can homeowners insurance be transferred to a new owner?
No, a homeowners policy follows the homeowner, not the home. Your homeowners policy is built not only for your home's structure but also for your belongings, personal assets, and net worth (for personal liability coverage). The new homeowners would need to have a homeowners policy in place once they receive full ownership of the home upon closing.
Do you need to maintain homeowners insurance on a home that's vacant for a period of time?
Your home must be insured during the selling process, even if you're not living in it. However, in most instances, standard homeowners insurance won't cover damage to a vacant home after a certain period of time.
If the home is sitting vacant, consider unoccupied home insurance. Vacant homes, or unoccupied homes, carry different risks from an occupied home. Learn more about insuring a vacant or unoccupied home.
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