If a home insurance policy is prepaid for a full year but the home gets sold, is the new owner covered after the sale?
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Asked September 10, 2012
Homeowners insurance, like all insurance products, is based in part on the personal demographics of the policy buyer. People who, as one example, have a medium to low credit score will pay higher premiums. Because the cost of the premiums will depend on the policy owner to such a large extent, a pre-paid policy cannot be transferred from one person to another. The new home owner will have to apply for their own property.
Homeowners insurance rates are based on many different factors. The home itself affects the premiums according to how old the house is, the materials it was made from, where it is located and other details. The owner of the home affects the policy premiums in the same way, including their credit score, their CLUE report, and personal factors which include age, marital status, and more. Since these factors will be different for everyone, there is no "standard" rate for home insurance.
Insurance policies, because of their nature, are written for one piece of property and one property owner. The primary advantage to paying for an annual policy in one payment is that you can reduce the total cost of the policy. That can save you a lot of money on insurance, but paying in advance is not a good economical choice if you are planning to sell the home. When the sale became final, your homeowners policy would be canceled and any money you have paid into it in advance would be lost.
On the other hand, if you rented the home instead of selling it, the structural and liability portions of the policy would still cover the home after the renters move in. Even in this situation though, you would suffer somewhat of a loss on the transaction, because a rental home does not need the same coverage as a primary residence. Specifically, your tenants would not be able to use the personal property portion of the policy, and would be unnecessary in lease situations.
Answered September 10, 2012 by Anonymous