It's always a good idea to shop around every so often to see if you could be saving cash on coverage for your home. But there's often confusion about how to change home insurance companies while you're in escrow. It doesn't have to be complicated though — read on to learn more.
first things first: what is an escrow account?
If you're part of the roughly 70 percent of U.S. homeowners who currently have a mortgage on their home, you've likely heard the term "escrow" at some point — but what does it mean?
Essentially, an escrow is a type of savings account managed by your lender for specific home-related expenses, like property taxes and homeowners insurance. When you make your mortgage payment each month, a certain amount is deposited into your escrow. Your lender then makes payments toward those home-related expenses from your escrow account.
You can even pay your homeowners insurance premiums through escrow.
switching home insurance while in escrow: 3 steps to follow
Whether you're looking for broader coverage options or trying to save some money on protection for your house, changing homeowners insurance companies while you're in escrow doesn't have to be a nightmare. In fact, by following these simple steps, you'll see how seamless the transition can be.
1. Read your current policy's terms and conditions
Be sure to give your existing homeowners policy a good read-through to ensure you won't get stuck with any fees or penalties for canceling your policy before the term expires. If you're unsure about your policy's effective dates, your insurer can fill you in.
If you'd rather wait until your policy expires rather than switch mid-term, let your lender know 30 to 60 days in advance so they don't make your policy renewal payment through your escrow.
2. Purchase your new policy (and remember to cancel your old one)
Once you've selected the homeowners insurance policy that feels right for your needs, go ahead and purchase it. It's important to make sure your new policy is in place before canceling your old one to avoid any lapses in coverage.
3. Notify your lender with your new insurance info
As we outlined above, your lender manages an escrow account in your name and makes payments toward your homeowners insurance premium from the funds you contribute to your escrow. It's key to let your mortgage company know when you change home insurers so that they can be sure to pay the right people. This can prevent all sorts of headaches, including a canceled policy.
And now that you've got the tools to start shopping around for homeowners insurance that works for you, why not start here? Get a fast, free quote online from Esurance, or speak with our licensed agents today at 1-866-439-5633.
Is homeowners insurance required?
An escrow account might be required by many mortgage companies, but what about homeowners insurance?
7 questions to ask while you're shopping for homeowners insurance
It can be difficult to know where to start as you shop for a new home policy, but asking these 7 questions can help.
More about homeowners insurance
Looking for another insurance product?