How to Change Your Homeowners Insurance With an Escrow Account

Written By: Michael Dollar

Date: March 24, 2017

Home insurance premiums can vary for a number of reasons – sometimes as much as several hundred dollars a year. That’s money you could be using for other things!

You may be thinking that you’d like to switch but you feel that it’s locked in with your mortgage payment. How it will affect your escrow account? Is it more trouble than it’s worth to switch?

The fact is that it’s not hard to do. We can help walk you through the process in five simple steps.

 

First a bit about escrow:

Your mortgage lender will usually open an escrow account to hold payments for homeowners insurance and property taxes. Part of your mortgage payment is being distributed to this account. When the insurance and property tax bills are due, your mortgage lender pays them from the escrow account.

Even though it appears that your lender is “paying” your insurance, you’re not stuck with the same provider. You can change your homeowners insurance company. The Real Estate Settlement Procurement Act (RESPA) gives you the legal right to do that. By law, you are free to shop around for a better rate. If you’re ready for a change, here are a few things to keep in mind:

 


Step 1: Check the terms of your current policy

95% of insurance companies do not charge an early termination fee but you’ll want to make sure there aren’t any other fees for canceling your policy early. Call your insurer if you’re unsure about your anniversary date. If you decide to wait until your policy expires, plan to call them 60 days in advance so they don’t automatically renew your policy for another year.

 

Step 2: Get quotes

To get the best deal, compare rates with several insurance companies. You’ll want to get quotes with matching limits, coverage and deductibles so you can really get a true comparison. Consider raising your deductible to see how much that lowers your rate. You might also ask about a discount if you bundle with other insurance products.

In addition to cost, it’s important to choose an insurance provider that you can trust to protect your home and family. Look at the company’s reputation with the Better Business Bureau, its ability to pay claims and customer service record.

Step 3: Break up

Make sure your new policy is in place, then call your insurance company to let them know you’re cancelling your policy. Give them as much notice as possible. To ensure there’s no lapse in coverage, set the cancellation date to coincide with the date your new policy takes effect.

 

Step 4: Notify Your Lender

Call your lender to let them know you’re changing insurance providers. The cost of your new insurance policy will change your mortgage payment. If your new insurance is less, your mortgage payment will go down, too. Your lender will need your new insurance agent’s name, phone number and your homeowners policy number. It’s also a good idea to double check that your coverage includes any requirements that your mortgage lender has.

 

Step 5: Are You Due a Refund?

Depending on how close you are to the date that your tax or insurance payment comes due, you may be entitled to a refund for any unused amount in your escrow account. Your insurance provider will cut you a check and send it directly to you.

You also don’t need to send your refund check to your new provider, although it’s not a bad idea to put at least some of it in your escrow account.

That’s it: You’re all set! Congratulations on successfully switching homeowners insurance companies!
ABOUT HUTCHINSON TRAYLOR

For more than 85 years, Georgia families and businesses have counted on Hutchinson Traylor for the best property and casualty, life and health insurance, as well as financial products and services. Known as a leader in the region, HT was recently named a 2016 Best Practices Agency by the Independent Insurance Agents & Brokers of America – an award given to only a small, elite group of top-performing agencies in the country. Call them today at 800-432-2997 to talk with a caring, friendly agent.

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