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Imagine getting a note like this:
“We finally sold the house and moved into a nice apartment. We canceled the homeowners policy at closing, since we don’t own a home anymore. The landlord has insurance on the building, so we’re covered, right? — Linda, 72”
Linda isn’t a real person. She’s a composite, an illustration of a situation many people face when they trade a house for a lease. But the question is a good one, and the answer is no.
“Your landlord’s insurance does not cover your belongings,” the Maryland Insurance Administration warns. (1) That policy protects the landlord’s building, not your furniture, your clothes or your grandmother’s ring.
And canceling the homeowners policy isn’t the only insurance change a move like this triggers. Maine’s insurance regulator notes that where you keep your car affects what you pay to insure it. (2)
The National Association of Insurance Commissioners also suggests getting quotes from several companies before you buy a policy. (3)
I’m a CPA and a former landlord, and I’ve been writing about money for 35-plus years. Here are the five things I’d tell Linda to check.
1. Tell your car insurer you moved — then compare
This one’s easy to forget in the chaos of a move.
“The location where the vehicle will be kept and/or driven affects the rates,” according to Maine’s Bureau of Insurance. (2) A new address can mean a new price, higher or lower.
Your annual mileage matters too. The same regulator notes that “the number of miles driven will affect the premium.” (2) If downsizing put you closer to the grocery store and the grandkids, tell your insurer.
Since a new address can change your rate anyway, it’s a natural time to compare. You can compare car insurance quotes to see what other insurers would charge at your new address.
One site to check: Insurify lets you compare real-time quotes side-by-side without the spam. It’s fast, secure, and rated 4.7 stars on Trustpilot.
It takes minutes to check, and it costs you nothing.
2. Add renters insurance to your moving checklist
Here’s what Linda’s missing. According to Maryland regulators, “Renters policies cover loss or damage to household contents or personal possessions.” (1)
Think about what moved with you: furniture, jewelry, a TV, a computer, decades of keepsakes. If a fire or burst pipe ruins them, the landlord’s policy won’t pay to replace them. (1)
You can compare renters insurance quotes with Insurify also.
Before you buy, walk through your new apartment with your phone and take a video of everything you own. If you ever file a claim, you’ll be glad you did.
3. Don’t forget liability — it may matter more than your stuff
Renters insurance is usually sold as protection for your belongings. In my view, the liability coverage may matter even more.
“A renters policy provides coverage for injuries to others and/or their property while they are on your property,” Maryland’s insurance regulator explains. (1)
Say a guest trips over your furniture and gets hurt. Without coverage, that bill could be yours.
As you get quotes, ask how much liability coverage comes with each policy and what it would cost to add more.
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4. Make sure you can afford a hotel if the worst happens
If a fire or flood makes your apartment unlivable, where do you go?
Renters insurance may help here, too. Maryland regulators say hotel stays and restaurant meals “may be covered under additional living expenses in the event of a covered loss.” (1)
For someone on a fixed income, a few weeks in a hotel could blow a hole in the budget. Ask each insurer exactly what this coverage pays and for how long.
5. Get the tax on the house sale right
Selling a home can be one of the biggest financial transactions of retirement, and the taxes can trip people up.
The IRS says you “may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.” (4)
To qualify, you generally must have owned and lived in the home for at least two of the five years before the sale. (4)
Gains above those limits can be taxable. And once the check clears, you’ll have a big sum to invest at a time in life when mistakes are hard to undo.
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My honest take
I think downsizing can be one of the smartest money moves a retiree makes. Less house can mean less upkeep, lower bills and more freedom.
But a move changes your life in a hundred small ways, and insurance is one that’s easy to overlook.
So as you settle in, make three calls: one to your car insurer, one to shop for renters coverage and one to the person who does your taxes.
Linda sold her house to make life simpler. A few phone calls can help keep it that way.
Sources: 1. Maryland Insurance Administration; 2. Maine Bureau of Insurance; 3. National Association of Insurance Commissioners; 4. IRS
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