paying homeowners insurance through escrow

Kick off your new chapter with a bang by getting an Esurance homeowners quote.

Or speak with our licensed agents at 1-866-439-5633.

For first-time homebuyers, the world of real estate brings a strange, new language: amortization … equity … butler pantry! But perhaps no head-scratcher comes up as often as "escrow." We'll explain this term once and for all, and how it relates to your homeowners coverage.

escrow explained

Escrow is a type of savings account designed to hold money you're using to pay for a home. Most home purchases involve 2 escrow accounts.

The first is for the initial transaction. This account, overseen by an escrow officer, holds all your deposits as well as important documents (such as the deed) while the deal is being worked out.

The second escrow account, and the one we're discussing in greater detail, is one you have with your mortgage lender throughout the entire life of the mortgage.

Here's the idea: Instead of paying your mortgage and other homeownership costs (like property taxes) separately and in large sums, you put your money into escrow and your lender parcels out the payments in smaller, periodic installments. And in your busy schedule, knowing your bills are taken care of goes a long way toward stress-free financial management.

At the end of year, if you find that you put more money into escrow than you ended up owing, your lender can reimburse you whatever funds didn't get used.

home insurance paid through escrow: how it works

While homeowners insurance may not be required by law, coverage is usually mandated by your mortgage company. Luckily, just as your escrow account goes toward your mortgage principal, interest, and property taxes, you can also use it to pay your policy premium.

The main advantages of escrow, compared to handling your premium on your own, is that you'll be able to easily set aside funds to prepare for the year ahead and arrange periodic payments that are easy on the wallet (well, easier anyway).

That's how homeowners insurance and escrow tie together to give you one less thing to worry about when scrambling to pay the bills.

should you ever refuse escrow?

Depending on the type of mortgage you have, escrow is frequently required. In those instances, obviously, refusing escrow (or "waiving escrow" as it's officially called) isn't an option.

If escrow isn't required, on the other hand, consider the following factors before deciding to waive it.

Your financial habits

If you're a responsible saver and know you'll have funds available to pay your mortgage, taxes, and homeowners insurance, you might consider waiving escrow.

Conversely, if you don't always trust yourself with money (that new TV is calling your name, after all) or just prefer to have some help budgeting, escrow gives you peace of mind that you won't accidentally miss or fall short on important payments.

Your preferred payment schedule

Some people are more comfortable paying a smaller, monthly rate for things like taxes and insurance. It provides a bit more stability and reduces the fear of, say, losing your job before a 4-figure bill is due. For these folks, an escrow account is pretty attractive.

If you're someone who'd rather pay annual bills in one lump sum and then forget about them for the rest of the year, waiving escrow might make more sense.

Your mortgage company's flexibility

Opening an escrow account can be a show of good faith to your mortgage lender. And depending on your company, they could negotiate a lower interest rate on your loan as a result, making escrow a very enticing cash-saver.

other home insurance payment options

Linking your home insurance and escrow can be a convenient way to effortlessly manage your premium. However, it might not be for everyone.

Good thing Esurance offers customers ultimate flexibility when it comes to paying their rates. Speak with our licensed agents at 1-800-ESURANCE (1-800-378-7262) to discuss payment options that best suit you, or log in to your policy to make changes with just a couple of clicks.

Not yet an Esurance customer? Get your free quote today to see how much you could save on homeowners insurance.

Car insurance payment options
Learn more about the methods available for paying your auto insurance premium.

Easy guide for first-time homebuyers
From opening escrow to making a down payment, our blog walks you through the key steps of buying your starter pad.

Get your free quote online

or call 1-866-439-5633