Can You Get A Homeowner's Insurance Refund When You Sell Your Home?

No one enjoys leaving money on the table at the conclusion of a real estate deal. During the sale process, house sellers might become so preoccupied with the major factors, such as purchase price, inspection items, and closing expenses, that they overlook the minor factors that can actually improve their bottom line.

Homeowners insurance is one of the most neglected aspects of this category. This is due to the fact that so few homeowners comprehend how homeowner's insurance works and, more crucially, what happens to the policy when a house is sold.

The Workings of Homeowner's Insurance

If you had a mortgage on your property, your lender would have also required you to carry homeowners insurance. In addition, if you did not make a sizable down payment of at least 20%, your mortgage lender would have paid your insurance and taxes through an escrow account that they established.

If you recall, there was a category of closing charges referred to as "Prepaids" when you acquired the property. Included in this category was the first year of Property Insurance.

A small percentage of your monthly payment went toward the next year's homeowners insurance coverage. This money was transferred into an escrow account managed by your lender. Your lender paid these expenses annually when they were due.

There are primarily two types of insurance funds. The first is the amount you've deposited into your escrow account for the current year. Your lender should automatically mail you a refund cheque for any remaining funds in your escrow account following the sale of your home. This cheque typically arrives three to four weeks after the closing.

The second category of funds is those that have been pre-paid. The insurance business already possesses these funds. When you sell your property, there will likely be a surplus of funds from the months during which you will not own it. This excess is what you are requesting from the insurance company.

For instance, if your homeowner's insurance policy begins each year on November 1st, your yearly payment is paid at that time for the subsequent 12 months. If you sell your house six months later, only six months of your insurance have been utilized. Since you have already paid for the entire year, you are entitled to a refund for the remainder.

How to Obtain Your Refund

In order to receive this refund, you will need to terminate your Homeowner's Insurance policy. If you fail to cancel the insurance, the already-paid premium will not be returned.

Determine the anniversary date of your mortgage. This is often your closing date. Find your closing paperwork's original copies. If you cannot locate your closing documents, your REALTOR® can help you locate them and provide you with the closing date.

Check your escrow account to determine the amount paid to your insurance company. Check your account statement or online portal.

Calculate the unused portion of your policy depending on your closing date. This is done by dividing the total policy amount paid (#2) by 365 days to obtain the per-day policy rate. Now, total the remaining number of days in the year following your closing date. Multiply this number by your policy's daily premium.

Contact your insurance provider to terminate your insurance policy and commence the cancellation and reimbursement process.

Keep Your Personal Property Covered - Don't forget to ensure that an insurance policy covers your personal property.

To cancel the coverage, it is necessary to notify the insurance company. Once you do so, they must refund the unused portion of your insurance for the year.

Call your insurance agent or the carrier's customer support number. Different businesses handle cancellations differently. Some may want you to sign a paper showing your decision to cancel coverage, while others may require you to write a letter declaring your intent.

Review coverage alternatives for your personal items during the relocation process while on the phone is also a good idea. Unless you have a separate policy in place, your personal property will no longer be covered once your homeowner's policy expires. Moving and storing items frequently results in unanticipated damages, so it is advisable to have coverage in place to safeguard your belongings.