If you have an escrow account, making changes to your home insurance is extremely quick and easy.
Changing Home Insurance Carriers with an Escrow Account
You Can Switch Insurance Anytime
You can switch your home insurance at any time, even mid-policy. Many people don’t realize they can cancel their home insurance policy at any time for any reason.
Nearly all insurance companies do not charge any cancellation fees for ending a policy early. This means you can instantly see savings from a new home insurance policy if the insurance premium is lower.
Switching is No Money Out-of-Pocket
Since your policy is in escrow, you can switch companies with no money out of pocket. Your escrow company will handle the transition, and all you will need to do is co-ordinate between the two parties.
Here are the steps you need to follow when switching your home insurance with a mortgage escrow account.
Step One: Start New Policy
When switching insurance, you should start your new policy with an effective date (start date) a week or two 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.
Step Two: Have Escrow Pay for New Policy
Once you get confirmation that the new policy has passed underwriting, call your mortgage company, or give your mortgage details to your new insurance agent.
The mortgage company 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. If contact the mortgage company directly, you will need the details of your new insurance policy.
Step Three: Cancel Your Old Policy
Call your old 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 time that has been paid for but not yet covered.
If the old policy was recently renewed, the refund check you receive could be quite large.
Step Four: Fund Escrow if Needed
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 old policy renews, 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 has enough funds in it to pay your new insurance company, and protects against your monthly mortgage payment increasing to compensate for an under-funded escrow.
