Among the many details you must handle when you move is what to do with your homeowner's insurance policy on your old house. Whether you receive a refund from the insurance company depends on several factors including where you're moving and how much you’ve paid on your current policy.
Insurance companies often offer various payment options including monthly, bimonthly, quarterly, semiannual or annual payment plans. When you move, whether or not you can expect a refund will depend on your payment plan. If you pay your premium once a year, which is often the case with escrow accounts, or every six months, you should qualify for a refund if you aren't in the same month as your policy renewal. However, if you pay your policy monthly, it's unlikely that you paid enough to get a refund.
You should call the insurance company at least a month before you move to help facilitate your refund. The company needs the last date you want your home covered so it can calculate your refund amount. Also, provide your new address. Policyholders can cancel their homeowner's insurance at any time, but the company won't issue a refund until after the last day of coverage. If you're moving at the same time that your policy would typically renew, don't assume the policy is canceled because you're moving. Policies are designed to automatically renew, so you must still call to inform your insurer that you don't plan to renew your policy.
The insurance company should pro-rate the amount you've paid to determine how much was used for your active months of coverage. For example, if you paid a lump sum for a year but move after four months, the insurance company divides the lump sum by 12 to determine the monthly charge. You should receive eight months' worth as your refund. However, the amount you receive might be less than a full eight months. The insurance company can keep a small amount to cover administrative fees. Also, the company won’t refund any broker's fees included in your premium.
The insurance company only issues refunds if you cancel your policy – and have a balance. If you transfer your policy to your new home instead of canceling it, you won't receive a refund. The premium at your new house might be different from your existing home, but the insurer should apply any balance overage to the new premium instead of refunding it. If you're moving into a rental property, you must change your homeowner's policy to a rental one, which is typically less expensive. You will likely have the option to apply your existing balance to the renter's policy or receive a refund.
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