For most of us, our house is our biggest and most valuable asset. It’s our shelter – our place to be safe and to call home.
And for that reason, we want to keep it protected when disaster strikes.
Homeowners insurance is a necessary way for us to keep our homes safe from the unpredictable.
A few things might cause you to change your homeowners insurance company.
First, you might switch homeowners insurance companies to save money. Shopping with us for better policies is an important part of the process, and we will look for the best possible option. Click here to learn more.
The other common reason is that you want to increase or reduce your coverage in a way that cannot be done by your current homeowners insurance company.
So, we begin the search for a company that can better meet your custom insurance needs.
Making the Switch
Whatever your reason is for switching, you’ll want to make this transition in the right way. Let’s take a moment to go through the steps of changing your insurance carrier.
Step 1: Break Up with Your Carrier
When you decide to change insurance companies, we just need a signature to make the move nice and easy for you.
Step 2: Refund the Refund
If your old policy hasn’t ended when you cancel, you may receive a refund check from your now-previous carrier. Before you run to the mall and splurge on your wish list, take a few deep breaths and send that fully endorsed check to your mortgage company.
Whoa, whoa, whoa! But that’s your refund! At a first glance, this can seem confusing. Let’s take a second to break down what’s really happening with this refund and how your mortgage company is involved in the process.
An escrow account that’s set up by your mortgage lender as a service to you, will pay your yearly homeowners insurance policy upfront. You’ll pay it back on a monthly basis as part of your regular mortgage payment. This way, your payments are more manageable.
But what does this have to do with your refund? Let’s say your yearly policy costs $1200. Your mortgage company pays that upfront, and you’ll pay in monthly increments of $100 as part of your escrow account.
After three months (during which you paid $300 for homeowners insurance), you decide to change insurance companies, meaning you receive a refund from your previous carrier. Since you’ve only had the policy for three months, you will receive a refund for nine months of insurance payments ($900).
Step 3: Beware the Escrow Shortage
If you change homeowners insurance companies, your mortgage company will again pay for your policy upfront. But if you didn’t send your mortgage company the refunded check from your previous policy, you’ll need to pay for both the old policy and the new policy as part of your monthly mortgage payment.
This basically means you don’t have enough money in your escrow account to pay for all of your insurance. This causes your monthly mortgage payment to increase the next time your annual escrow analysis is performed.
This is why sending your fully endorsed refund check to your mortgage company, is usually easier. If you prefer, you can send a personal check for the amount of the refund you received instead.
Where Do I Send My Refund?
Once you’ve received your refund and your new policy, you should send those documents along with your loan number and property address to your mortgage co.
By doing this, you’ll be taking full advantage of your new policy and keeping your escrow account in check.