Finances (US)
How to change homeowners insurance when you have an escrow account?
Learn how to change homeowners insurance with an escrow account. We have prepared a simple step-by-step with all you need to know!
Homeowners insurance & escrow account: how to switch services
Today, we will explain how to change homeowners insurance with an escrow account. An escrow account is a separate account usually held by a bank or a lender.
When you start your mortgage, in most cases an escrow account is opened to cover other home expenses, including homeowners insurance, mortgage insurance, and real estate taxes.
According to surveys, the average mortgage payment per month in the United States is almost $1,500.
In this value, a portion goes to an escrow account. Therefore, there are a few ways to lower this monthly mortgage payment.
Union Home Insurance review: protect your home
Check out the Union Home Insurance review article and learn how to protect your home with affordable coverage and excellent customer service.
One of those ways is searching for cheaper homeowners insurance. Keep reading to learn how to switch services and save money!
How does homeowners insurance work with an escrow account?
As mentioned above, when you have an escrow account, a portion of your monthly mortgage payment goes to this account.
The objective is to cover some expenses like mortgage insurance, real estate taxes, and homeowners insurance.
So, in summary, every month you pay the monthly portion of your home insurance premium to the mortgage company.
Then, the lender or bank holds this monthly portion in your escrow account until your insurance policy renewal. After that, the bank or lender pays the insurance company in full.
Although an escrow account is not required, you might find it a good deal if you consider saving money for other home expenses during your mortgage.
On the other hand, it is crucial to find affordable insurance policies to keep your monthly mortgage payments reasonable. Therefore, sometimes, changing insurance companies might be worth considering.
However, taking a few additional steps when switching insurance services when you have an escrow account is fundamental.
Even though it is totally possible to change home insurance companies with an escrow account, it is not as easy and fast as it would be without an escrow account.
But it is not impossible. Actually, we have prepared a simple step-by-step so you can find it pretty straightforward to change companies.
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How to change homeowners insurance when you have an escrow account?
Now, let’s review how to change homeowners insurance companies when you have an escrow account.
As mentioned before, an escrow account offers convenience since you save a portion of your monthly mortgage payment on other home expenses, including real estate taxes, mortgage insurance, and homeowners insurance.
On the hand, it can be tricky to change insurance companies with an escrow account. But don’t worry!
Take a look at the simple step-by-step we have prepared for you right below!
1. Search for a new homeowners insurance company
The first step to change your homeowners insurance is to find a cheaper and better company to lower your monthly mortgage payment is search for a new carrier.
Most of the companies offer free quotation. Therefore, it is essential to set your needs, budget, and goals, and quote your possibilities.
Then, choose the best that fits your requirements.
2. Be sure you confirm your mortgage lender information
Before signing up for a new insurance policy, you need to verify the mortgagee clause. That is, all your lender’s information or how your mortgage lender must be listed.
So, contact your mortgage lender to confirm all information needed, and be sure your mortgagee clause verification is correct.
3. Apply for the new policy and then cancel the old one
Before canceling the old policy, certify your new policy is effective and active. Therefore, purchase your new policy prior than cancel your old one.
Following this step guarantees you won’t take risks on gap or overlap in coverage.
Therefore, in case you have any trouble with activating your new policy, the old one still covers you.
4. Contact your mortgage lender
In theory, your mortgage company will receive a notice with the old policy cancelation and another notice with the new policy declaration.
However, it is recommended that you notify your mortgage lender about your change of insurance companies. Also, it is crucial to let them know some details about your new policy, including the number, date of effectiveness, and name.
5. Get the premium refunds and send them to an escrow account
Finally, depending on the point of the policy cycle you ask for the cancelation, you might have premium refunds to get.
For example, if you cancel your old policy in the midterm cycle, you will get a premium refund. However, if you cancel it right before renewal, you won’t get a refund since your annual premium is already used.
Therefore, it is important to know if you have premium refunds to get. And if so, contact your mortgage lender to notify them and check how to send the money to your escrow account.
Recommendation: the best home insurance companies
Now you know how to change homeowners insurance when you have an escrow account. Although it is not as easy and fast as it is without having an escrow account, our simple step-by-step made it straightforward as it should be.
As you can see, having an escrow account is convenient. On the other hand, it is important to know the costs of home expenses that an escrow account covers.
For example, this account covers your homeowners insurance. This cost will be added to your monthly mortgage payment.
So, if your payment is high, you can lower it simply by switching home insurance companies.
As mentioned above, the first step is to search for those companies and find which fits your needs, budget, and goals better.
Therefore, we have selected some great services with comprehensive and customizable policies at affordable prices.
Then, read our next article to find out which companies may help you with your homeowners insurance.
About the author / Aline Augusto
Reviewed by / Aline Barbosa
Senior Editor
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