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QUESTION: When I was looking for a cheaper homeowner's policy, another company told me that my current homeowners's company will drop me if they find out my house is for sale. Can they do that?


ANSWER: I find the question slightly confusing so I will try to cover all the bases. All contracts of insurance are specific, i.e. they are between you and the insurer, and they only apply to the identified property. So, whoever carries your home insurance will cancel the policy when you sell your home. If you have your home on the market, new insurers will be annoyed if you do not disclose the fact that the property is for sale. There are quite often discounts offered to persuade people to change insurance companies. If you change insurer and sell quickly, the new insurer will not have the chance to recover the discount over time. You may find future insurers load your premium rates on your next home if you adopt a short-term approach.

If you have held the policy for a reasonable period of time, it would be quite unusual for your existing insurer to cancel the policy just because you want to sell your home. In fact, given the depressed state of the housing market right now, it may take quite some time to find a buyer at a price you find acceptable. So long as you continue to pay the premium instalments on time, the insurer should continue coverage. If the insurer threatens to cancel the policy only because you wish to sell, complain to your state's Department or Office of Insurance. The final factor to consider is the mortgage. Mortgagees always have a requirement that you insure the property. Many sell a policy as a part of the home loan package. If you have a home insurance policy tied in with your mortgage, there is no need to worry. The insurer will not cancel unless and until you sell and pay off the loan. If there are problems with an independent insurer, notify your mortgagee immediately as this could affect the terms of the loan.

Hopefully, this answers the question.

Best wishes


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