Final answer:
The friend will most likely need to purchase a new insurance policy because homeowner's insurance is based on individual risk profiles and is not typically transferable upon change of ownership. Insurance companies assess new homeowners independently and set terms based on their specific risks.
Step-by-step explanation:
When a homeowner sells his house to a friend and the friend wants to keep the homeowner's current policy in effect, the most likely outcome under the assignment provision is that the friend will have to purchase a new insurance policy. This is because homeowner's insurance policies are generally not transferable due to the change in ownership and risk profile. Insurance companies typically assess the risk based on the individual homeowner and the friend would have a different risk profile that the insurance company would need to evaluate.
Insurance markets and government interventions often require that insurance policies be purchased but they cannot compel companies to sell insurance to all individuals particularly if they are assessed as high risk. Thus, the new homeowner may need to obtain a new insurance policy that reflects their own risk assessment. The concept of Escrow is also relevant when purchasing a home as it involves a third party managing the payment of homeowner's insurance and property taxes often as part of a monthly payment after the initial insurance arrangements are made.