How to Change Homeowners Insurance with an Escrow Account

Mon Jul 13 2020

If you pay for your homeowners insurance through an escrow account, you’re not alone.

Nearly 80 percent of homeowners do. Many homeowners set up an escrow account through their mortgage company to use part of their monthly payment to cover homeowners insurance and property taxes. While those with less than 20 percent down on a house are usually required to have an escrow account, any homeowner can request one through their mortgage company.

Unfortunately, many folks think switching home insurance is a hassle if the policy is paid for via escrow. That misconception may keep them from saving hundreds or thousands of dollars a year.

It’s easy to change your homeowners insurance when you have an escrow account, and it can reduce your monthly expenses. It’s also worth noting that you have the right to change insurance companies any time for any reason.

Let’s see how simple it can be to switch your coverage – even mid policy term – when you pay through escrow.

1. Get Your Current Declarations Page

When you’re shopping for new home insurance coverage, don’t make the switch on price alone (although that’s a high priority!). Request a copy of your declarations page from your current company, or if you don’t know who your insurer is, you can find out through your mortgage company.

Your declarations page will list your coverages and limits so you can directly compare your new quote to what you currently have. Pay close attention to your coverage A (dwelling insurance) and your coverage C (personal property insurance) – you don’t want to shortchange these. Though you may decide some coverage options aren’t as important as they seemed when you first bought insurance, match each coverage to ensure you’re accurately comparing prices.

If you just go on price, you may get less coverage, and that can leave you vulnerable when a storm hits.

Check out this guide for more tips on finding the best home insurance.

2. Buy the New Policy

Buy your new policy before you cancel the old policy – you don’t want any lapse in coverage that could leave you uninsured for damages that happen in that window.

You’ll have the option to pay for your new policy (usually in full) with your escrow account. For Kin, you’ll just need to submit the name of your mortgage company so we can bill them for the new policy.

3. Cancel Your Old Policy

Give your old insurance company a call and let them know you have changed insurance and want to cancel your policy. Tell them the date you got new coverage, even if it was a couple days earlier. If you have any unused premium, you’ll receive a prorated refund based on your new policy’s start date.

4. Let Your Mortgage Company Do the Rest

Mortgage companies usually pay premiums annually. So if you switch in the middle of your policy term, your old insurance company will owe you a refund for the unused premium. This is usually sent to you directly, not your mortgage company.

If you don’t have enough funds in your escrow account to pay for the new premium, your lender will typically cover the shortage, and you’ll repay them in a sump sum or over a stretch of months. There may be some adjustments in escrow to make sure the right amount is collected for your annual premium.

Your mortgage company may send you a notice to ask for approval to pay the new insurance company. Once you approve, they will send the payment, and your new policy will be squared away.

That’s all there is to it!

When Your Mortgage Payment Changes

If you have an escrow account, your mortgage monthly payment may go up or down. Your mortgage portion hasn’t changed – that stays the same unless you refinance the mortgage. Your total monthly mortgage payment typically only changes if your property taxes or your homeowners insurance costs have increased or decreased.

If you aren’t sure what caused the change, you can request an audit of your escrow account. Your mortgage company will review the account and let you know the results.

Changing Policies Mid-Term

If you want to change your insurance company for any reason, you can. Think you’re paying too much for insurance and want to cut costs? No problem. Had a claim that wasn’t handled well? You can change insurance companies. Just because the insurance is handled through escrow doesn’t mean you’re stuck with that insurance company.

No matter where you are in your policy term when you switch – near the renewal date, mid-term, or just a couple months in – the same steps outlined above apply if you pay through escrow. You can switch policies at any time.

So what are you waiting for? Get better coverage at a better price.