To sell a house it takes a village, but oftentimes sellers forget to put one underrated team member on speed dial: their homeowners insurance agent.
85% of homeowners have insurance to protect their property from threats like wind and hail, fire damage, and theft. If you bought your house with a mortgage, then setting up insurance was a required step. Yet considering only 6% of insured homes have claims, when you go to sell your house it’d be surprising if your first thought was:
“Better call up my insurance buddy Joe to check on my homeowners policy!”
You laugh now, just make sure you’re not crying later. The average American has 68% of their total wealth tied up in their home, and anyone who’s ever dealt with claims knows that companies will find any loophole to avoid paying out. Was your house vacant at the time it got vandalized during your home sale? Did you cancel the policy a week before the storm of the century hit your town due to a closing mixup?
Say it with us now: Coverage…denied.
Who better to explain exactly what you need to do than an insurance agent with 12 years of experience (meet Grant Sims of Greenville, South Carolina) and a top real estate agent who knows what you’re going through on the sell side.
Follow their advice and you can make this whole insurance transfer business a simple check-off on your to-do list.
We’ve made it easy by breaking it down into a list of the main things you want your insurance agent to know when selling your house:
1. Your moving plans
It’s a good idea to let your homeowners insurance agent know you’re planning to move in the next few months. This gives your agent plenty of time to look up policy options for the new home you’ll be moving into, and allows you time to compare options and rates.
And this applies even if you haven’t picked out another house yet. If you just know the neighborhood or area you’re planning on moving to, your insurance agent can look into whether you’ll need add-ons (like flood insurance, for example, if you’re moving into a flood plain), and give you a rough estimate of what to expect your yearly insurance costs to be moving forward.
2. If your house is going to be vacant for any period of time
If you’ll be moving out of your home before it closes, leaving it vacant, you’ll need to check with your agent about the company’s policy regarding vacant homes.
Many insurance providers are less inclined to insure vacant homes than occupied ones, simply because it’s a lot easier for something like theft or vandalism to occur when a home is unoccupied.
“Some companies require you to tell them immediately, while others will cover it just the same for up to six months,” Sims says.
“So you need to contact your agent right away and find out what your company mandates. Because let’s say you have a claim in 30 days, but you didn’t tell the company the home was vacant. They’ll say, ‘Well, you didn’t tell us, so you’re not covered.’”
3. Extra coverage needs for the future
According to Sims, the moving process is the perfect time to take inventory of your belongings, which will help you see whether you’ve got the right amount of insurance coverage going into your new home or if you need to bump up your policy. This is especially true if you’ve got items of value, like jewelry, a grand piano, or expensive artwork in the mix.
Most companies require you to itemize belongings that are over a certain value in order for them to be covered under your homeowners policy.
“Nobody wants to pay more for a policy, but the worst thing is to have to say, ‘I had this [valuable item] stolen,’ and the company to say, ‘You didn’t itemize, so it’s not covered.’ Most companies don’t require anything formal, though some do. So you should always check with your agent about what’s required.”
4. Any dated home features that will be hard for buyers to insure for
Sometimes the listing process turns up issues that you have to address for your potential buyer’s insurance purposes—even if you had no trouble getting insurance for your home when you purchased it.
For example, maybe your home has polybutylene piping—a problematic type of plumbing that many insurers no longer cover. Perhaps it was grandfathered in under the policy you purchased years ago but will pose a serious issue to the buyer who’s trying to get a new policy.
Another example, says Jim Geracie, a top performing real estate agent in Milwaukee area, is a property with an old fuse system.
“I will classically say to my seller clients, ‘I know you’ve had coverage, but a buyer going out in 2019 to try and find coverage for these fuses is going to run into a brick wall,’” explains Geracie. “Hence we’re probably going to have to replace these electric panels to make sure that a buyer can get insurance and therefore financing.”
5. Your expected closing date
Once your home is actually under contract, let your homeowners insurance agent know your expected closing date.
If you’re transferring your policy to your new home, this is the point at which your agent will notify your current carrier that you’ll be moving, give them your new address, and obtain any additional information they need about your new property in order to complete the transfer.
Keep in mind that transferring a policy doesn’t actually mean you’re keeping the same policy. Each homeowners insurance policy is unique to the home it’s insuring, so your rate could go down or up depending on factors like the crime rate in your new neighborhood, the age of your new home, the age of your roof, location in a floodplain, etc.
6. Your actual closing date
According to Sims, there’s no reason to ask your insurance agent to cancel your policy until you’ve signed the closing paperwork. In fact, doing so could result in a coverage gap or require you to keep calling back to make adjustments.
“Closing dates change all the time, which could mean you have to cancel and rewrite the policy each time it changes,” Sims says. “If it were me selling my house, when I left closing I’d call my agent and say, ‘Cancel my policy.’ The cancellation process is pretty immediate.”
Bottom line is… you don’t want to cancel your policy until the house is no longer yours. This will prevent the possibility that you’re left without coverage because a closing date is moved out by a few weeks or a month.
For example, if you ask your agent to cancel the policy on June 25, but on June 24 the financing gets held up and closing is pushed out until July 10, you’ve got two weeks that your home would be sitting uninsured.
If a claim happened during that time, covering the damages would come out of your pocket, and if it’s something major—a tree falling on the home, for example—it could derail your sale entirely.
7. Moving protections
As you’re tidying up, decluttering, and downsizing your home to get it ready to list, you should also take a look at your homeowners insurance policy to see exactly what is covered.
For example, if something is broken during the moving process, would your policy cover the damages? You’d think that because the belongings are insured when they’re in your home, they should be insured whether or not they’re in a moving truck.
In this type of policy, coverage is provided for anything other than what is specifically excluded, and when it comes to the claims process, the burden of proof is on the insurance company. In other words, if you submitted a claim and they wanted to dispute it, they would have to prove that the situation leading to the claim was specifically excluded from the policy.
Named perils policies, on the other hand, work on the opposite principle: they only provide coverage for perils that are specifically named in the policy, such as smoke, fire, windstorm, riot or civil commotion, etc. These policies will not include moving damages as named perils, so if something breaks in transit during your move, you’re on your own.
This, of course, is why moving companies offer moving insurance for an extra fee.
When in doubt, contact your homeowners insurance agent
While your homeowners insurance policy may not be top of mind while you’re selling your home, it’s important to keep the lines of communication with your insurance agent open throughout this process. Otherwise, you run the risk of overlooking something that could make it much harder for you to pack up, move out, and move on into the next chapter of life.
Header Image Source: (Hassan OUAJBIR/ Unsplash)