What to know about homeowners insurance refund checks

A homeowners insurance refund check is your reimbursement from the insurance company when you’re owed a premium refund. Depending on how you pay your home insurance bill, the refund check will either be paid directly to you or your mortgage lender.

Learn how home insurance refund checks are calculated, what to do when you get a homeowners insurance refund check, and what to do if you’re expecting a refund check but never receive one. 

Why do home insurance refund checks happen?

Home insurance refund checks are sent when the insurance company owes you money. Here are a few reasons why you might receive a refund check from your home insurance provider.

• Overpayment: If the payments you’ve made exceed your cost of coverage (called your premium), either because of an extra payment or an incorrect payment amount, you might get a refund check. 
• Premium reduction: If your policy cost goes down because you qualify for new discounts or adjust your coverage or deductibles, your insurer might give you a refund check if you already paid the higher rate. 
• Policy cancellation: If you cancel your policy because you’ve sold your home, paid off your mortgage, switched lenders, or changed insurance companies (or any other reason), your insurance company may give you a refund if the cancellation occurs before the policy’s expiration date.

How are refund checks calculated and issued

How homeowners insurance companies calculate and issue refund checks depends on the situation. Here are some of the most common scenarios.

If you have unused premiums

If you cancel your policy before it ends, you are typically entitled to a refund for the remaining period you already paid for. However, keep in mind that some insurers charge a cancellation fee, which they subtract from your total refund amount. If you pay your premiums through an escrow account, the insurance company will likely send the check to your lender to be credited back to that account. If you pay your insurer directly, the check should be mailed straight to you.

If there’s a billing adjustment

If you’re getting a refund check because of billing adjustments, such as an overpayment or a rate change from the insurance company, the amount owed is calculated based on the difference between the higher amount you paid and the lower amount you should have paid. If you pay the company directly, you’ll receive the refund check, but if you’re paying through escrow, your lender will probably get the money.

If you paid off your house

If you were paying your home insurance premiums through an escrow account and you recently paid off your mortgage, your lender is required to close the escrow account and send you any leftover funds. 

Pro tip: When you pay off your home, the insurance company does not automatically know. Be sure to contact your insurer so that future bills are sent directly to you instead of the bank.

What to do when you receive a home insurance refund check

When you receive a home insurance refund check, don’t cash it right away. Here’s what you should do first:

1. Find out why you received the check. First, find out why you received the check. Especially if you weren't expecting a refund, you should call your home insurance company to ask why the refund was issued. This will also help you verify that the check is legitimate and safe to cash. 
2. Make sure your home insurance is still active. If you received a home insurance refund check, it can sometimes mean that your policy was canceled or that your coverage changed. Double check that your policy is still active and that your coverage has not changed (unless you requested adjustments). 
3. See who the check is made out to. Look to see whose name is on the check. If your name is the only one, it is safe to cash. If your name and your lender’s name are on the check, contact your lender — it may have to endorse the check before it can be deposited. If only your lender’s name is on the check, you’ll likely need to send it to the lender. 
4. Deposit the check. If you’ve determined you are in the clear, you can deposit the check into your bank account. For good measure, keep a copy or a photo of the check and any emails or correspondence with your insurer or lender about the refund. This will come in handy if there is ever a dispute.

Common pitfalls, mistakes & what to avoid

If you receive a home insurance refund check, here are some common pitfalls and mistakes to avoid.

• Depositing the check right away: As mentioned, if you get a refund check from your home insurance company, don’t assume the money is for you — even if your name is on the check. In some cases, the money is really for your lender, and depositing it into your personal account can have consequences. Always check with your lender to find out if you’re allowed to cash the check or if the check should be forwarded to the mortgage company.
• Waiting too long to deposit the money: Home insurance refund checks are usually only valid for a certain amount of time, often between 90 and 180 days. If you forget to deposit the check or take too long to forward the check to your lender, it’s possible that the check could expire. In this case, you would need to request a new check from the insurance company, which could take a few weeks or longer.
• Assuming your coverage is unchanged: One of the most common misconceptions about home insurance refund checks is that the check is free money. In reality, receiving a refund often means your policy has been canceled or your coverage has changed. If you don’t get in touch with your insurance company, it’s possible that you could be uninsured or underinsured and not realize it.

How refund checks impact escrow accounts and mortgage payments

Home insurance refund checks aren’t necessarily extra money for the policyholder. They can impact your escrow account and your mortgage in a few ways.

If you’re paying your home insurance premium from an escrow account, the insurance refund check should be deposited into that account, not your personal account. In this case, checks are usually made out to the lender, or you and the lender jointly. The money goes back into the escrow account, which can be used to pay future insurance premiums. 

If there’s a surplus of money in the escrow account after a refund, your lender should give you an escrow refund. This typically happens during the annual review period. If you’ve deposited more money into your escrow account than what is needed to cover your insurance premiums, your lender will send you a check for the difference. That money can go into your personal account. 

Another thing to know is that refund checks can potentially reduce your monthly mortgage payments. If you receive a refund because the cost of your home insurance went down, and your home insurance premium is lumped into your mortgage payment, you could end up paying less each month for your loan. 

What to do if you never receive the refund check

If you’re expecting a refund check from your home insurance company and never receive it, it is important to act quickly. Here’s what you should do:

1. Contact your insurance company. Call your insurance company, confirm that the refund is being issued, and ask about the status of the check. The insurer can let you know whether the check was mailed and when to expect it.
2. Find out if the check was cashed. If the insurance company already mailed the check and you never got it, find out if the check was cashed. The insurance company should have a record of deposited payments. 
3. Notify your lender. If you’re not able to solve the issue with your insurance company, notify your lender. It’s possible that the lender received the check, especially if you were paying your premiums through an escrow account. 
4. Escalate the issue to the billing department. If the status of the check remains unknown, consider escalating the issue to your insurance company’s billing department. As a last resort, you can also file a complaint with your state’s insurance department.

Frequently asked questions

Does every home insurance policy offer refunds if canceled early?

No, a refund isn’t guaranteed if you cancel a home insurance policy early. But most insurers offer a pro-rated refund if you paid in full and cancel before the term ends. A cancellation fee may apply; if so, it will likely be deducted from your refund.

How long until I receive a refund after I cancel?

Home insurance refunds usually take seven to 15 days, but it depends on the insurer. Typically, direct deposit refunds arrive faster than paper checks.

Who gets the check — me or my mortgage company?

Who gets the home insurance refund check mostly depends on how you pay your premium. If you pay your premium from an escrow account that’s managed by your lender, your lender will receive the money. If you pay the insurer directly, you should get the check. 

Can refund checks be direct deposit or only mailed?

Most home insurance companies can issue a refund via direct deposit. If you’re owed a refund, you may be asked how you want to receive the funds. Otherwise, you could contact a customer service representative to request direct deposit.

Will getting a refund cancel my insurance coverage automatically?

No, getting a home insurance refund does not automatically mean your policy is canceled. But if you get a refund check, it’s important to make sure that your policy is still active and your coverage is unchanged, unless you requested a cancellation or adjustment.  

Do I have to pay taxes on a home insurance refund?

You don’t have to pay taxes on a home insurance refund because the money isn’t considered income. Usually, you’re getting money back that you overpaid.