Can I Change My Homeowners Insurance If It’s Paid Through an Escrow Account?
Most people will only buy and own one, or maybe two, homes in their entire lifetime. Yet just because your plans for homeownership don’t change, doesn’t mean that your homeowner’s insurance policy should also stay exactly the same.
The fact is that homeowners insurance rates change over time, and the rate you received when you purchased your home may not be the best rate today. This is especially true if you have made improvements on your home that may impact your coverage.
At Sungate Insurance Agency, our goal is always to help you find the best homeowners insurance policy at the best possible rate, in order to save you money while still ensuring that your home and its contents are covered in case the unthinkable happens. Getting an estimate for homeowner’s insurance from one of our insurance experts is always easy, and best of all, it’s always free!
Unfortunately, we often hear that people don’t shop around for a better rate because their homeowner’s insurance is paid through an escrow account by their mortgage holder, thereby locking them into the insurance plan—and rate—dating from their original purchase of the house. However, just because your mortgage includes an escrow account and payment of your homeowners insurance, doesn’t mean that you can’t switch insurance plans. In other words, paying homeowners insurance through an escrow account doesn’t lock you into a particular homeowners insurance policy.
So to answer the basic question “Can I change my homeowner’s insurance if it’s paid through an escrow account”: Yes, you can! And frankly, it’s surprisingly simple.
The Basic Steps Required to Change a Homeowners Insurance Policy Paid Through Escrow
First, it’s best to take a look at your current homeowners policy and your current escrow set-up to figure out how much coverage you have and how much you are paying. To do this, you will need two things:
- A mortgage statement from your bank or lender: This will outline how much of your monthly payment goes into your escrow account, as well as how much the escrow account has accumulated and what has been paid out of it. It’s important to note that most escrow accounts cover both homeowners insurance and property tax payments.
- A copy of your homeowners insurance policy: This should be sent to you directly from your insurance company when your policy renews each year. It will outline exactly what the policy covers and how much it costs. It should also include a notice if there is a penalty for early cancellation, and when cancellation is possible (if your current policy contains such a penalty, plan on making the switch at the right time to avoid unnecessary fees.) You should use this statement to compare both cost and coverage with new estimates.
Second, start gathering estimates for new policies. At Sungate Insurance Agency, we offer free quotes on homeowners insurance. Our insurance experts will talk to you about your home and the type of coverage you are looking for to ensure that we can provide a detailed quote with enough information to help you make an informed decision. And although we hope our rates are the lowest, we encourage you to obtain several quotes (usually more than 2) to be sure that you are getting the right coverage at the right price.
Third, contact your mortgage provider to find out what paperwork they need from you to make a smooth transition. While this step isn’t required in advance of purchasing a new policy, we highly recommend it. By finding out what your mortgage provider needs in advance, you can be sure you get the right documentation and deliver it to the right office the first time. Most mortgage providers will need a new declarations page from the new policy, as well as written notice that you cancelled the old policy. However, every mortgage provider has its own requirements, so it is best to touch base with them before making the switch.
Once you have made the switch and sent your mortgage provider the correct documentation, they will update your file to ensure that future payments are made to the correct insurance company. Additionally, they may adjust your monthly payments to account for the cost of the new premium. If you end the year with a surplus in your escrow account, you may receive an escrow surplus check; however, it is possible you may owe some additional money into the escrow account as well, especially if your state requires a minimum escrow balance.
Contact Sungate Insurance Agency and speak with one of our insurance experts to obtain a free quote on homeowners insurance and to learn how we can help you switch to a better policy today!
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