This is the answer from an insurance company in reference to whose insurance covers what when the seller occupies home after closing.
If Mr. Seller sells his house to Mr. Buyer and remains in the house for a period of time afterwards, he should maintain an insurance policy either on the house he has sold or on a policy for a different location.
This will give him coverage for his contents and for liability while he remains in the house. In the case of a fire, I would imagine that the buyer's homeowner's policy would be primary since the house is now deeded to him.
In the same case of the fire, if the seller's belongings were destroyed, he would probably then have coverage under a homeowner's or renter's policy in his own name. This situation is a bit gray being there would be two policies in force.
The two insurance companies would make the determination at the time of the claim as to what policy would cover what. I believe that as long as both parties had a policy in their own names that they would each be protected.
In a perfect situation, the seller would vacate the property as soon as it was sold. Since this is not always possible and the situations are very temporary, most insurance companies would probably respond to pay a claim for one or the other party they have a policy in force for.
I hope this information helps. As with most insurance cases, they are not always cut and dry. More protection is always better than less or no protection.
(I use a copy of this in my listing packets, to help educate the seller of a possible problem.)
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