How to Switch Home insurance when you Escrow

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Can you switch your home insurance if it’s escrowed?

If you’re buying a new home or you’ve owned your home for a while, you may be familiar or may be getting ready to be familiar with what the mortgage industry calls Escrow.  Escrow is basically a fancy word to say that we’re going to collect you homeowners insurance and real estate taxes by dividing it up into monthly payments and put with your mortgage payment.

Now, a lot of people when they buy their home, they usually get their home owners insurance to be effective at the same time as their closing.  For several years, you may not pay much attention to your homeowners insurance because it is actually included in the payment through your mortgage payment.  Because people see the home owners insurance built into their mortgage payment, they believe they can’t change their home owners insurance without effecting their mortgage.  This is 100% inaccurate.  Your homeowners insurance is actually separate from your mortgage, you can change it at any time.  Here’s how it works.

Let’s say you have gotten your escrow statement recently and the mortgage company is getting ready to make an adjustment to your mortgage payment.  You wonder why it is increasing.  After further investigation, you have noticed your homeowners insurance has increased by $100 a month.  You want to start shopping for new homeowners insurance, but don’t know how it works.

First, you will need to get some quotes on your homeowner insurance.  If you didn’t already know this, when getting a home insurance quote, it saves a lot of time if you can locate an independent insurance agent that has access to multiple insurance companies.  There is a link below that can take you to a quote page to get started if you’re interested.


Once you have obtained a better home owners insurance quote, now its time to put that policy in effect.  You can either make this policy effective when your current policy is going to be cancelled if you’re 60 days or less from the renewal, or you can choose to put it in force as soon as possible.  If you choose to make it effective at renewal, this is the simplest way to switch your homeowners insurance in escrow.  You will tell your insurance agent to put it in force effective the date the current policy will expire and the insurance agent will put it on escrow billed so you don’t have to pay anything out of your pocket up front.  The only thing left to do is notify the mortgage company that you are switching insurance companies and that you don’t want them to pay the renewal on the current policy.  They will want the updated insurance information, which all you have to do is provide the insurance agent the best way the mortgage company wants to receive that information.  It is usually via fax, email, or an online portal the agent can update your information for you.

If you are more than 60 days from you renewal, and the savings on the new insurance quote is worth the savings and coverage to go ahead and switch, there are a few more steps involved in the process.  Once you have established the new insurance quote you want to put in force, you determine the date you want it to be effective.  The insurance agent with make it effective on that date and set it up to be escrow billed, so you don’t have to come up with any money to put it in force.  But now is where the added steps come in.  What you have to do next is contact your current insurance provider and tell them you want to cancel it effective the date the new policy is going to be in force.  Once they do that, there is a refund for the prorata amount of the policy that is being cancelled that you will receive in the mail because this policy was paid in full for the year by the mortgage company.  The insurance companies will mail you the check for the refund, not the mortgage company.  But wait, you don’t get to keep that money.  It needs to go back to your mortgage company so your escrow account is not way out of balance.  You will have to contact the mortgage company now to tell them you have switched insurance companies and ask them where you need to send the refund when you receive.  Once you have received the refund and deposited back to escrow, you can then contact them again to ask if they will adjust your monthly escrow accordingly since your new home owners insurance is less per year now.  You still need to provide the insurance agent with the mortgage company’s contact info to update the them on the new home owners insurance.

It sounds a little more complicated than what it is.  It’s actually a pretty seamless process, especially if you are dealing with an insurance agent that is familiar with how the process works too.  Hopefully this has been helpful if you are currently having your homeowners insurance escrowed and are curious how to change it.

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