Insurance while you're selling your house

Keep your homeowners policy in force until the sale closes and the deed has transferred, and cancel it only after that. Until closing you own the house, you carry the risk of a fire or a burst pipe, and you are the person a visitor would sue. Listing the house, hosting showings and moving out each raise a question your insurer may care about, and an open claim or a repair done for the buyer can complicate the sale.

Why you stay insured until closing

A purchase contract does not move ownership. Title passes at closing. Who bears a loss between signing and closing depends on the contract and on state law, and many contracts put the risk on the seller, who must then deliver the house in substantially the condition it was in. Even where the buyer carries some risk, a lender financing the purchase will require a policy in the buyer's name that starts at closing, not before. Cancel early and a fire in the interval would be your problem, with no policy to pay for it and a buyer who can walk away from the contract.

So the rule is simple: keep paying for the policy until the settlement statement is signed and the house is conveyed. You still have an insurable interest until then. Your agent or attorney can confirm when risk of loss transfers under your contract.

Showings, open houses and liability

A house for sale draws strangers. Your liability coverage applies when a visitor is injured on your premises and you are legally responsible, and an agent's showing or an open house does not change that. A buyer who trips on a loose stair or a broker who falls on an icy walk could make a claim. Medical payments coverage helps with small injuries regardless of fault; see Medical payments to others (Coverage F) explained. Your personal liability coverage responds when you are sued.

Reasonable steps lower the odds:

• Fix loose handrails, broken steps and cracked walks before listing.
• Clear ice and snow before every showing.
• Lock away prescriptions, jewelry, cash, firearms and keys. Coverage for theft is limited for several of these items under the standard form, and a showing is the moment you cannot watch.
• Secure pets. A dog bite from a buyer is a liability claim, and some policies exclude certain breeds. See dog bites, breed lists and homeowners liability.
• Ask your listing agent about the brokerage's own coverage for showings and open houses, and about lockboxes. Do not assume the brokerage's policy protects you.

If you move out before you sell

Many sellers move first and sell later, leaving the house empty or lightly furnished for months. That is the situation that triggers vacancy and unoccupancy limits. The ISO HO-3 (HO 00 03 05 11) excludes vandalism and malicious mischief and glass breakage once a dwelling has been vacant more than 60 consecutive days, and many insurers' own forms add limits at 30 or 60 days on water damage, theft or freezing. A staged but unlived-in house sits in a gray area, because "vacant" and "unoccupied" are not always defined. vacancy and unoccupancy exclusions explains the difference and how claims turn on it.

Do this before you move out:

1. Tell your insurer the date you plan to move and that the house will be listed for sale.
2. Ask in writing whether coverage changes after 30 or 60 days, and what the policy requires, such as heat kept on, water shut off, or periodic inspections.
3. Consider a vacant-dwelling policy if the house will be empty for longer than the policy allows; see vacant home insurance: when you need it and what it covers.
4. Keep utilities on. A winterized, drained house is different from one with the heat set at 55 degrees. Follow your policy's instructions, because an unheated empty house is where freeze claims go wrong. See burst and frozen pipes: what's covered.
5. Check the house on a schedule and keep a dated log.

If you must leave, the insurer's willingness to keep you on may depend on the length of the vacancy, your claim history and the house's condition.

Inspections, repairs and the buyer's insurer

The buyer's inspection produces a list. Some items matter to insurers as well as buyers: an old roof near the end of its life, an outdated electrical panel, polybutylene or galvanized plumbing, a missing handrail. The buyer's lender will require the buyer to obtain a policy, and the buyer's insurer may inspect, ask for repairs or decline to write the house. If a buyer cannot get insurance, the deal can fail. You can protect the sale by fixing known issues first. See roof inspections: what insurance inspectors look for, Federal Pacific, Zinsco and other problem electrical panels and polybutylene, galvanized and other pipes insurers dislike.

A hypothetical: the inspection finds a roof with six years of life left and a panel from a brand some insurers will not write. The buyer's agent calls three insurers; two decline and one quotes at a surcharge. You may choose to replace the panel or give a credit rather than lose the buyer. A seller who knows insurability is a risk can ask a local agent which items insurers are objecting to before listing.

An open claim during a sale

A claim does not stop you from selling, but it needs care.

• Do not sell a damaged house as undamaged. Disclosure rules vary by state; ask your agent or attorney what you must disclose about past water damage, fire or an open claim.
• Finish repairs, or assign the claim carefully. If you sell before repairs are complete, the payment may not transfer to the buyer. The proceeds belong to the insured, and the policy may have conditions about repairs. Talk to the insurer and your attorney before closing.
• Know the history is visible. Buyers and their insurers can see loss history on a CLUE report for the property. Claims you filed on the house can follow it, even to the next owner. A paid claim on the report affects the buyer's quote more than you might expect.

Cancelling at the right moment

After closing, contact your insurer to cancel, giving the closing date. Confirm the cancellation date in writing so it matches the transfer. Cancel effective the day of closing, not earlier. If you paid the year in advance, you are due the unearned portion back, either pro rata or at a short rate. A pro-rata refund returns the exact unused share, while a short-rate penalty withholds part. Your insurer's cancellation rules, or your state's, decide which applies; see how to cancel homeowners insurance and get a refund. If your lender paid the premium from escrow, the refund usually goes to the lender or to you through the escrow close-out. Make sure the policy does not renew, and cancel any separate flood policy too.

If you are buying another home in the same transaction chain, moving: insuring two homes and your things in transit covers coverage on two houses and your belongings.

Checklist for sellers

• Confirm the policy stays active through closing.
• Tell your insurer you are listing and when you will move out.
• Ask what changes when the house is empty for 30 or 60 days.
• Secure valuables before showings; fix trip hazards.
• Fix insurability problems the buyer's insurer will raise.
• Disclose losses as required by your state.
• Cancel after closing, with written confirmation and the refund method.

Key takeaways

• Keep your homeowners policy until closing; ownership and risk do not transfer when you sign a contract.
• Showings and open houses do not change your liability exposure, but they raise the odds of an injury or theft, so prepare the house.
• Moving out first can trigger vacancy limits after 30 or 60 days; tell your insurer and ask for it in writing.
• Insurability problems found in the buyer's inspection can sink a sale, so fix the known ones.
• Cancel after closing, get the date and refund in writing, and check how a refund is calculated.