What happens to home insurance if I sell my house?

To address the issue of home insurance and the sale of the home, the first thing we have to answer is whether it is mandatory to have contracted home insurance . The answer varies if the house is mortgaged or not. In the event that the house is paid for , it is not mandatory to have home insurance, but it is highly recommended in the event of possible incidents that may occur and the economic consequences: fires, floods, lack of electricity, theft or even that in days of wind a pot falls to a passer-by.

However, mortgaged homes do have to have home insurance . But, it should be clarified that this policy can be contracted with any insurance company, since there is no obligation that the contracting has to be with the financial institution.

Home insurance in the sale of a home without a mortgage

As we have already indicated before the sale of a home we can contemplate different possibilities. One of them is when the home that is for sale is not mortgaged . In this case, the homeowner can choose between two alternatives:

  • Cancel the policy of the house that is for sale and take out a new policy according to the needs of the acquired house.
  • Request the insurance company to modify the data to adapt them to the new home.

How to cancel home insurance

As with other types of insurance, such as car, life, death or health, the term is 12 months, automatically extendable provided that the insured does not contact the company to report the termination within the term of a month in advance . This is an important term that should be remembered because if the cancellation of the policy is not requested on time, you will incur a breach of contract, with economic consequences.

When it comes to canceling an insurance policy, it is convenient to let the company know in writing , by means of a letter and remember that it always has to be at least one month in advance.

What happens to the part of the premium not used?

To answer this question, different situations must be taken into account.

Subrogate mortgage

One of them has to do with the subrogation of the mortgage. If this is your case, the new owner can continue with the same policy. To do this, the policyholder must notify the insurance company within 15 days, and the latter, in turn, usually takes another two weeks to accept or reject the transfer of the policy. In the event that there is a denial by the insurer, it will have to return to the policyholder the part of the premium that has not been consumed , as indicated in the Insurance Contract Law, article 35:

«The insurer must return the part of the premium corresponding to periods of insurance, for which, as a result of the termination, it has not borne the risk»

new mortgage

In those cases in which the new tenant chooses to make a new mortgage, the home policy will no longer be valid, so they will have to take out new home insurance . In these cases, it is advisable to notify the insurance company as soon as this new situation is known. On the other hand, in these cases there are insurers that do not collect the monthly payments that are pending or return the proportional part of the monthly payments that remain until the end of the annual contract.

In any case , it is advisable to read the conditions of the policies very well when contracting, to take into account all these aspects. The policies, in addition to the coverage, have to contemplate the consequences for the insured to cancel the policy before time and if it is possible to receive the proportional part of the policy that has not been consumed.

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