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When Should Homesellers Cancel Homeowners Insurance?

October 05 2018
by Leisl Bailey

When Should Homesellers Cancel Homeowners Insurance?

When to cancel home insurance when selling is often a last-minute contemplation. Seller’s get their home under contract, and as the days count down to close, they start chomping at the bit to move. The worst possible thing you can do when selling a home is to cancel your home insurance too soon.

In this article, we’ll go over the best time to cancel your home insurance, what could happen if you cancel too soon, and your options for getting a refund on your remaining insurance balance.

When To Cancel Home Insurance When Selling

The best time to cancel your home insurance is when the profits from the seller hit your bank account. Cancel anytime before this, and you could end up in a bind.


One couple’s home was ready to close. They canceled their homeowner’s insurance that day, as it was their closing date.

They had everything packed up and were preparing to hand over the keys as soon as the buyer’s funds transferred. The buyer had already been approved for the loan, documents were signed, and permission for a funds transfer was underway.

Until a last-minute credit check was run, and the lender rescinded the funds.

It turns out that the buyer’s had decided to purchase a washer and dryer on their credit card so they could do laundry when they first moved in.

The sale was postponed 30 days as the lender and buyer sorted things out, and the sellers now had 30 days of extra homeowner’s insurance that they had to get. This resulted in start-up fees and other hassles they simply did not want.

Another situation that happens more often than not is the buyer will open up a line of credit after the close. This could be in the form of a new credit card or purchasing a car.

Opening a line of credit usually lowers your credit score a bit and puts you in more debt: two things lenders don’t like to see right before lending a large amount of money to someone. When this happens, it either delays the closing date or dissolves the transaction altogether.

Can I get a refund from my homeowner’s insurance?

Often seller’s wonder if they can get a refund from their homeowner’s insurance. Whether or not you can get a refund depends on your insurance policy.

While you shouldn’t cancel before the funds hit your account, you should let your insurance agent know when you are planning to close. That way they can get any paperwork ready and have a pro-rated amount to refund you if you are able to get one.

If your home insurance policy has annual payments, then they may pro-rate your insurance for the months you have left. This means if you have a 12-month policy that you pay in January, and you move in April, they’ll divide your premium by 12 and give you the remaining eight months of money.

If you’re planning on transferring your home insurance then you’ll want to notify your insurance when you begin the buying/selling process. They’ll help run the rates for you when you are considering which house to purchase.

It’s important to note that when you transfer your insurance that you will not receive a refund. You don’t receive a refund because they put the remaining balance toward insuring your new home.


When to cancel your home insurance is just one question of many that you need to assess at closing. Make sure you hold onto your policy until the funds have transferred to prevent any last minute changes to your policy.

Need a local expert to help you sell your house and buy a new one? You need Clever. Clever agents are top rated experts in your area, who help you for a low flat rate. Call us today at   1-833-2-CLEVER or fill out our online form to get started.




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