Brian, when should my sellers cancel their homeowner’s insurance?

I would not want sellers cancelling their homeowner’s insurance until the deed is recorded, the payoff is received, and the sellers have their money in hand.

Obviously, sellers want to cancel their insurance as soon as possible because they will receive a refund of any unearned premium and the sooner the cancellation the more they get back.  Equally as obvious, they want to make sure that the transaction is concluded and they are no longer deemed to be the owners of the property because they run the risk that they will be responsible for a claim – the house burns down for example – without insurance to pay for it.

 So, when are the sellers no longer deemed to be the owners?  There is a long-standing debate concerning the precise moment of “closing” for many purposes.  It might well be that once all the conditions of the contract, the lender, the title insurance company, and the Wet Settlement Act are met that one could legally say closing has occurred for the purposes of a claim against the house.  However, it makes no sense whatsoever to recommend that your clients test that analysis in court with their personal fortune at stake.  Rather, prudence would dictate that they wait until the three conditions I noted above are met.  Typically, these are completed within a week to 10 days. 

I know agents are always looking for good reasons to touch base with clients, so I would suggest that you remind your sellers to cancel 10 days after closing as long as the deed is recorded and they have their money.  You might also take that opportunity to remind them to look for an escrow refund from their mortgage company, an excess payoff refund from their mortgage company, and to expect an unearned premium refund from their homeowner’s (and flood if applicable) insurance company.  Likewise, there may be some opportunity to receive an MIP/PMI refund and you might help them look into that.