What happens if an insured sells his home but does not cancel the insurance policy and the home subsequently burns down?

When an insured sells their home but does not cancel the insurance policy, the key issue that arises is the concept of insurable interest. Insurable interest is a requirement in insurance contracts which ensures that the policyholder has a legitimate stake in the insured property. Since the home has been sold, the previous owner no longer holds any ownership or financial interest in the property.

In this case, if the home burns down after the sale, the former owner cannot file a claim on the insurance policy because they lack insurable interest in the property. Therefore, without the legal standing to claim damages, the insured is unable to receive compensation for the loss.

This clarification underscores that even though a policy may remain active until officially canceled, the fundamental requirement of insurable interest must be present for a valid claim to be made in the event of a loss.