When to Cancel Homeowners Insurance When Selling a House
Seamlessly manage your homeowners insurance policy as you sell your house.
Selling a house involves many considerations, and homeowners often wonder about the appropriate time to cancel their homeowners insurance policy. Understanding the correct timing prevents coverage gaps and unnecessary expenses. Continuous protection for the property is essential until ownership officially transfers to the buyer.
Determining the Right Cancellation Time
Homeowners can safely cancel their insurance policy after the closing date, when the new owners take possession and the sale is finalized. Maintaining continuous coverage until this point is important because the seller remains responsible for the property until the deed is transferred. Canceling too early could leave the seller liable for any damage or incidents that happen between the early cancellation date and the actual transfer of ownership. For instance, if a fire or other damage occurs before closing but after the policy was canceled, the seller would be responsible for the costs.
Sellers should keep their homeowners insurance active even if they have moved out of the home and removed their possessions, as they remain liable for any damage or injuries on the property until the sale is complete. If visitors, such as potential buyers or inspectors, are injured on the property before closing, the seller’s liability coverage would apply. Consulting with a real estate agent or closing attorney can provide specific guidance tailored to the sale agreement and local practices regarding possession transfer, ensuring all parties are clear on when insurance responsibility shifts.
Initiating the Cancellation Process
Once the home sale is finalized and ownership has transferred, contact your insurance provider to cancel your homeowners insurance policy. This stops payments for coverage on a property you no longer own. You can reach your insurer by phone, email, or online portal, depending on their communication channels.
When initiating the cancellation, you will need to provide specific information to your insurer. This includes your policy number, the effective date you want the cancellation to occur, and potentially a new mailing address for refund processing. Some insurance companies may require a written request for cancellation, possibly on a specific form, or a simple letter stating your intent. It is advisable to request written confirmation of the cancellation from your insurance provider, noting the final date of coverage, to ensure there are no misunderstandings.
Receiving Your Refund and Escrow Adjustments
After canceling a homeowners insurance policy, homeowners are eligible for a prorated premium refund. This means the unearned portion of the premium for the remaining policy term will be returned, as you paid in advance for coverage you no longer use. For example, if an annual policy was paid upfront and canceled six months into the term, a refund for the remaining six months would be due. Most refunds arrive within 7 to 30 days, though processing times vary among companies.
If premiums were paid through an escrow account, the refund process involves the mortgage servicer. The insurance refund may be sent directly to the mortgage company, which will then deposit it into your escrow account. Alternatively, some refunds might be sent directly to the homeowner. If the refund is sent to you, it is advisable to forward it to your mortgage servicer to avoid an escrow shortage, which could increase future monthly mortgage payments. Review statements or contact your mortgage servicer or escrow company for clarification on how your specific refund will be handled.