Homeowners Insurance When Selling a House: What to Know

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Moving can be stressful. With all the things you need to remember about getting your property in order, it’s important to keep insurance needs on the list, too. Having the proper coverage for your property is the ultimate safety net in case disaster strikes.

When you’re selling your house, there are a few things you should keep in mind when it comes to homeowners insurance. Let’s break them down.

What to Know About Homeowners Insurance When Selling a House

If you’re living in your house while it’s on the market, a homeowners policy should be sufficient to cover you. But, if you’re selling an unoccupied house absent of furniture and other belongings, you’ll likely need vacant home insurance. 

Selling your home doesn’t alter the need for insurance very much. You still need coverage, especially if you have a lender. Homeowners insurance will still cover your home when it’s on the market as long as you’re still living in it. You’re still covered from all the same perils, and your policy can even cover some risks that pop up during the selling and moving process.

How Home Insurance Covers You When Selling a House

When selling your house, you may have more guests stopping by than usual in the form of realtors, prospective buyers, appraisers, home inspectors, and more. The liability coverage in your home insurance will cover you if one of these people sustains an injury on your property that you may be liable for. 

For example, let’s say you host an open house. A visitor gets injured when they slip and fall on your stairs. If they decide to pursue you for their medical bills and expenses, your insurance can cover you.

And, when moving all your belongings, the personal property coverage in your policy still protects your stuff from many forms of damage – even though it’s not at the insured premises. For example, you could be reimbursed if some of your personal property gets stolen while moving. And, although unlikely, you should be covered if a fire or a natural disaster destroys any of your things while in transit. 

Homeowners insurance doesn’t cover any damage caused by moving or packing up your stuff, though. For instance, you can’t be reimbursed by your provider if clumsy movers or friends drop or break something valuable.

When You Need Vacant Home Insurance

If you’ve already moved out of the house you’re selling, and taken most of your belongings with you, then home insurance may not cover your property. Providers expect you to be living in the house you have a policy on, especially if those were the terms that were understood when you bound the policy. There’s a different type of insurance specifically designed for homes that sit empty for months: vacant home insurance.

Vacant home insurance covers properties that (a) haven’t had or won’t have residents for a while and (b) don’t have much, if any, personal property inside. An empty house presents different insurance needs than a house that’s being lived in, and a vacant home insurance policy satisfies these needs.

Vacant home policies cover the structure of the house, and they don’t include provisions like loss of use and medical payments. They generally cost a bit more than a home insurance policy would, but that’s because an empty house is a greater risk. 

Since no one is living in the house, that means no one is around to stop something if there’s an issue, like a broken pipe or a fire. This increased chance of unmitigated damage is why some insurers are hesitant to cover vacant homes, and why a separate policy is often necessary.

If your insurer discovers that a home you have a homeowners policy on that they expected you to be living in has actually been vacant for months, your provider could deny claims from that property or even cancel coverage in some cases. This is why understanding which plan you need is so important.

Can You Sell an Uninsured House?

You can sell a house without homeowners insurance. If you own the home you’re selling outright – meaning you don’t have a mortgage – you don’t have an obligation to have home insurance. But, be aware that you’re financially responsible for any damage that your house may suffer while on the market.

Any sort of damage could ruin a potential sale. If you don’t have a home insurance policy, you’ll be on the hook for all the repairs yourself. Anything from a major natural disaster like a hurricane or a tornado, to something small-scale like a water leak, could jeopardize your home sale.

Home insurance policies cover several forms of damage. If your house was to suffer a problem, at least your insurer can reimburse you so you can get back on track as soon as possible. 

You can’t look for coverage after you experience the damage, either, since insurers rarely cover pre-existing issues. So, when selling your house, it’s better to be proactive and pay for protection – before something goes wrong.

At Clovered, we believe looking for home insurance shouldn’t be a challenging process for anyone. We try to simplify insurance, and if you need coverage, we’d be happy to help. You can go through our home insurance quote platform to bind a policy entirely online, or you can reach out to one of our licensed, experienced agents by phone or email who would be happy to assist you with finding a policy that fits your needs.

When Do I Need to Cancel Home Insurance When Selling?

You should have insurance in place as long as you’re responsible for the house you’re selling. When selling your home, don’t cancel your homeowners insurance (or vacant home insurance policy) until a buyer has closed on the house. 

Until you close, you still own the house. It isn’t a good idea to cancel your insurance just because you’ve agreed on a sale because something could happen before the closing date that could cause the sale to fall through.

Then, not only are you responsible for any damage that could occur, but you also have a lapse in coverage. Any lapse in homeowners insurance coverage is a big red flag for providers when you’re trying to get a new policy. You’ll likely pay higher rates in the future.

When you’re ready to cancel your policy, it should be a relatively painless process. Just call your insurer with the news that you’re moving, and you should be able to end it fairly easily. You’ll likely need your policy number, personal information, and maybe a proof of sale. You’ll probably need to notify your lender, too, if you pay your home insurance through escrow.

If you’re canceling your policy before the effective term is up, you should be entitled to a refund if you paid in full when you bound your policy. Since you didn’t use the whole plan, you may be able to get back some of the unused premiums that you paid.

For instance, if you only used eight months of coverage, but you paid for 12 months, then you can likely get a refund of the premiums you paid for those unused four months. Ask your insurer when you contact them.

If you know you plan on ending your policy prematurely, be sure that you have your new coverage lined up for your new property. Start shopping early, as you don’t want to be scrambling for new insurance.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.

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