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There are many things to do when preparing to sell your home. Once you have an Agreement of Purchase and Sale signed, and a firm closing date, you should then start making arrangements with your local utility companies to have final readings taken on the day of closing, and to have final accounts sent to your new address. Most sellers also send advance notice to their home insurer to cancel their insurance as of the day of closing. This step, in my opinion, is a mistake.

During the time between the signing of the Agreement of Purchase and Sale and the completion of the sale, it is the seller’s responsibility to keep the property insured. Section 14 of the standard Ontario Real Estate Association Agreement for resale houses states:

“All buildings on the property and all other things being purchased shall be and remain until completion at the risk of Seller. Pending completion, Seller shall hold all insurance policies, if any, and the proceeds thereof in trust for the parties as their interests may appear and in the event of substantial damage, Buyer may either terminate this Agreement and have all monies paid returned without interest or deduction or else take the proceeds of any insurance and complete the purchase.”

Until the sale is completed, it is the seller’s responsibility to maintain adequate home insurance, and should substantial damage occur at the property (e.g. a fire), the buyer will have the option to either terminate the deal or accept the insurance proceeds and close the sale with the property as is.

The importance of not cancelling your home insurance until after the sale has been completed, and the property is then owned by the buyer, is that in some cases, closing dates are extended due to reasons such as the buyer requiring an extra day or two to obtain financing. If this happens, it usually happens at the last minute, on the original closing date. If you have already cancelled your home insurance as of that date, with all the other things that a seller normally has to take care of on the closing date, it is easy to forget to contact your insurer to extend your coverage until the new closing date. In some cases, once an insurance policy has been cancelled, the insurer will require the seller to set up a brand new policy, with all the associated costs and paperwork to go along with that. It is much safer, and normally only incrementally more costly, to just maintain your existing home insurance and cancel only after your sale actually closes

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