If you’re selling your house, you might be wondering if you can cancel your homeowners insurance policy before the closing date. After all, you don’t want to pay for insurance you don’t need anymore, right?
The answer isn’t so simple. There are some factors to consider before you decide to cancel your homeowners insurance policy when you’re selling a house. Homeownership comes with a host of responsibilities, including ensuring your investment is adequately protected. Below, we explain the considerations involved in canceling homeowners insurance before closing and provide valuable insights so you can make an informed decision.
Why You Should Keep Your Homeowners Insurance until Closing
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 coverage. Until that time, your homeowners insurance policy should remain in place to provide protection should anything happen to the home.
For example, if your home is damaged by a fire, storm, or vandalism before closing, your homeowners insurance policy will cover the repair costs. However, if you cancel your policy too soon, you’ll be responsible for paying out of pocket for any damages that occur prior to closing.
Additionally, if you have a mortgage on your house, your lender may require you to keep your homeowners insurance policy until the loan is paid off. If you cancel your policy without notifying your lender, you may face penalties or fees.
How to Cancel Your Homeowners Insurance when Selling a House
If you’ve decided to cancel your homeowners insurance policy when you’re selling your house, you’ll need to follow some steps to do it properly:
- First, you’ll need to notify your insurance agent in writing. This letter of cancellation should include your name, policy number, the property’s address, the date of desired cancellation, and your wish to cancel. If you’ve paid for coverage beyond the date of cancellation, your letter should also include a request for a prorated refund.
- Second, you’ll need to wait until you have a closing date before submitting your request to cancel the insurance. This way, you can avoid any gaps in coverage or unnecessary payments. You can also ask your agent to backdate the cancellation if you don’t cancel until after your new policy has taken effect.
- Third, you’ll need to notify your mortgage lender of your cancellation. Your lender may need proof that you’ve sold the house and paid off the loan. You may also need to provide them with information about your new homeowners insurance policy if you’re buying another home right away.
Alternatives to Canceling Your Homeowners Insurance
If you aren’t sure whether you should cancel your homeowners insurance policy when you’re selling a house, there are a couple of alternatives you can consider:
- One option is to transfer your policy to your new home if you’re buying another one right away. This way, you can avoid paying for two policies at once and keep the same coverage and discounts you have with your current insurer. However, this option may not be available if your new home has different risks or features than your old one.
- Another option is to keep your policy in place until the buyer’s insurance takes effect. This way, you can ensure there’s no gap in coverage and avoid any liability issues if something happens to the house after closing. However, this option may not be feasible if the buyer’s insurance doesn’t start right away or there’s a delay in closing.
If you have any concerns or questions regarding your homeowners insurance during the home-selling process, it’s crucial to communicate with your insurance agent. The agent can guide you through the best course of action and ensure you have the appropriate coverage in place at all times. Remember, maintaining continuous insurance coverage safeguards your investment and keeps you prepared for any unforeseen events.
Following the tips above can ensure you have the right coverage for your needs. For reliable, affordable home insurance, San Diego homeowners know they can trust Altra Insurance Services. We also provide renters, commercial, motorcycle, and auto insurance. Request a free quote by calling one of our friendly agents today at (619) 404-6311.