Selling your house is difficult and often lengthy, but you want to ensure you make the best decisions throughout the sale to save money. Home insurance is just one piece of that process because it protects you from costly repairs in case of a damaging event.
You can shop around for the best premium and coverage, you’re not tethered to any provider, and you can cancel anytime, as long as you have a replacement home insurance policy in place.
But when selling your house, it may not be clear when to altogether cancel the policy that covers the house for sale. After all, you may have already moved into a new home, so why would you need to keep paying for insurance?
In this article, we answer this important question and others about canceling home insurance during the selling process.
When Should You Cancel Your Home Insurance When Selling Your Home?
Although most home decisions depend on your circumstances, there’s really only one answer here: You should cancel your home insurance after you officially close the sale of your house.
Mortgage lenders require you to have home insurance for your property for as long as you have a mortgage. So, without a mortgage, technically you could sell your house without insurance and cancel your policy early.
But you shouldn’t, and here’s why.
Why You Should Keep Your Homeowners Insurance When Selling Your House
While you may save money by canceling your policy once you have a buyer, the house for sale is still in your name until you officially close. That means the house is still your responsibility, even though you may have moved out.
As long as the house is in your name, any damage to the property will be on you to pay for. By keeping your home insurance policy, your provider can cover several problems with the house for sale instead of your wallet.
For example, imagine a fire scorched a wall during your selling process. Because most home insurance covers fire, you’d have a much easier time dealing with the repairs if you still had your policy. But if you cancel your policy too early, you’d have to pay the costs out of pocket.
Even worse, if you don’t have the home insurance anymore to ease the pain of untimely damage, your buyer may pull their offer.
Home Insurance for Your New Home
If you wait to cancel your home insurance until after your old house’s sale, you might wonder if and how your new house should be covered.
For a short period, you may own two properties at once: the old house you haven’t yet sold and the new house you bought. If you own two properties, you should have home insurance on both, even if there is an overlap in the policies for a few days.
In fact, you may not have a choice but to buy home insurance for your new home. If you have a mortgage, your lender requires home insurance.
Buying Home Insurance for Your New Home
You can’t transfer your home insurance policy from one property to another because every house has its own costs to rebuild and risks requiring different coverages. Similarly, you cannot transfer homeowners insurance to a new owner.
However, you can get a new policy for your new house from the same provider.
Also, you may have paid more for your old home’s policy than you used if you cancel before the policy period ends. Your provider may transfer these payments to your new policy if you purchase it from the same provider.
In other words, if you choose the same provider for your new home’s insurance, what you overpaid on the old policy can go toward your new one.
For example, you might have paid $1,000 upfront for a year’s worth of insurance on your old house. If you cancel the policy after six months because you’re selling the house, the provider may credit your new policy with $500 or a half year’s worth of the old policy.
How to Cancel Your Homeowners Insurance After the Sale
After you’ve signed the real estate purchase agreement that transfers ownership of the house, it’s finally time to cancel your home insurance.
The cancellation process is simple. It starts with a phone call or written letter to your insurance agent or provider, depending on what it requires.
To prepare for cancellation, gather the following information:
- Your desired cancellation date (which should be after your closing date)
- Your policy’s declarations page
- Your policy number
- Your old home’s address
The provider may ask you to complete a form that states how their cancellation works, any fees they may charge you, and any refunds you’ll receive.
You can expect to complete the cancellation process the same day you contact your provider.
Homeowners Insurance Refund After the Sale
When purchasing a home insurance policy, you can usually pay in one of several ways, including monthly, every six months, or yearly. Six-month and yearly payments happen up front, meaning you may pay for longer than you will use, but you won’t have to bother with monthly payments.
If you cancel before your policy period ends (whether you’re selling your home or otherwise), your provider may give you a refund for the portion of your policy period you did not use.
For example, if you paid $1,200 for an entire home insurance policy period (typically one year) but canceled after five months. That leaves seven months of unused insurance, which can warrant a $700 refund.
Ask your insurance provider if they charge a financial penalty (a short rate cancellation) for premature cancellation. In the uncommon event that it does charge you the fee, see what you can do to minimize the fee. Your provider will typically deduct your fee from your refund.
Do You Have to Cancel Home Insurance After Selling?
While we recommend waiting until after closing to cancel, you definitely need to cancel your home insurance after selling. You don’t want to pay hundreds of dollars in coverage for a home you no longer own.
Contact your provider if you forgot to cancel your homeowners’ insurance when you sold your house. You will most likely be able to negotiate at least a partial refund for the time you meant to cancel.
When In Doubt, Contact Your Insurance Provider
Canceling your current home insurance after you close and purchasing insurance for your new home are smart financial decisions. Not only will you have peace of mind by having the needed protection for your properties, but you will also save yourself from expensive repairs should damage occur to your home while selling it.
You should always contact your agent or provider whenever you have questions or updates about canceling your home insurance when moving.
Call your insurance company if your cancellation date needs to change because your closing date has been postponed. Call your insurance company if you’re unsure about cancellation or want to find out how to lower your cancellation fees.