We compare quotes from the nation's top insurers:
Changing Home Insurance Carriers with an Escrow Account
If you have an escrow account, making changes to your home insurance is extremely quick and easy.
You can switch your home insurance at any time, even mid-policy. Many people don't realize that they can cancel their home insurance policy at any time for any reason. About 90% of insurance companies do not charge any cancellation fees. This means you can instantly see savings from a new home insurance policy!
Since your policy is in escrow, you can also switch companies with no money out of pocket! In fact, your escrow company prefers to pay for the insurance rather than have you do it.
Here are the steps you need to follow when switching your home insurance with a mortgage escrow account.
- Start the new policy before canceling the old policy. The best plan is to start your new policy with an effective date (start date) a few weeks or so in the future. This will allow time for your policy to go through the underwriting and internal approval processes before being funded. As part of this process, your new insurance company may send out a representative to measure the square footage, visually assess the condition of the roof, and perform other checks and validations. Be sure to confirm with your new agent that your policy has passed underwriting before proceeding with the next steps. You don't want to find out after you have canceled your current policy that the new policy was not approved, leaving you without coverage!
- Have your escrow company record and pay for the new policy. Once you get confirmation that the new policy has passed underwriting, call your mortgage company. They will add the new policy to your escrow account, take the old policy off your account, and pay for the new policy out of the escrow account. You will need the name and phone number of the agent for your new policy.
- Call your current insurance company to cancel your policy. Only you as the insured can legally cancel your policy. Your new agent and escrow company can't do this for you. Since your mortgage company always pays in-full and up front for your insurance, you will receive a pro-rated refund check in the mail for the period that is canceled. If the current policy had 10 months of coverage remaining, the refund check could be quite large!
- Make sure your escrow has enough money to pay for the new policy. If you are switching home insurance companies just a few months after you started your current policy, your escrow account may not have enough money to pay for the new policy. If this is the case, you may want to send at least a portion of your refund check back to your mortgage escrow account. This can ensure that your escrow payment (and hence your mortgage payment) doesn't increase next year to make up for insufficient funding due to the increase in payment activity. You can include this as an additional escrow amount with any mortgage payment.