How to Change Homeowners Insurance with a Mortgage Escrow Account

When you buy a home, especially the first time, your lender will often require a mortgage escrow account be established for your Ohio homeowners insurance and property taxes.

So as long as you stay with the same homeowners insurance, the lender will continue receiving an invoice at renewal and will pay out of the mortgage escrow account.  But what if you decide to change your homeowners insurance in the future? How does that work? And are you allowed to do that? To answer these questions, we have to start with the basics of homeowners insurance.

How Ohio homeowners insurance policies work

The standard home insurance policy is issued for a 12 month period of time. As far I know, there is no law (at least in Ohio) that states you MUST wait until that period of time has passed to get different homeowners insurance. 

The home insurance policy is yours and as the insured you get the right to make decisions about that policy, including cancelling it on a specific date. 

Once your 12 months is over, the next 12 month period is called your renewal. Yes, many people wait until renewal to make a switch, but you are NOT required to.

The standard home insurance policy is issued for a 12 month period of time. As far I know, there is no law (at least in Ohio) that states you MUST wait until that period of time has passed to get different homeowners insurance. 

The home insurance policy is yours and as the insured you get the right to make decisions about that policy, including cancelling it on a specific date. 

Once your 12 months is over, the next 12 month period is called your renewal. Yes, many people wait until renewal to make a switch, but you are NOT required to.

So I found different homeowners insurance- what happens with my mortgage escrow account when I switch?

There are two possible situations:

– Switch at your renewal

– Switch at a time other than renewal

Read on for a detailed explanation of how each works, along with super helpful advice for making the switch easy. 

How To Change Homeowners Insurance with a mortgage escrow account AT RENEWAL

This is the easiest situation. However timing is still important. Most insurance companies send their bill to the mortgage company 30 days before the renewal. This means if you want the switch to go smoothly, you’ll need to switch to your new insurance BEFORE that 30 day mark. This gives the insurance company time to process the application and send the bill to the lender. 

Now it’s certainly possible that your prior insurance company may send a bill sooner than 30 days before renewal and the lender ends up with TWO bills and pays one or both or none. The trigger for you to start making calls to the lender and your insurance agent is when you receive a cancellation notice for the new policy. This means it has NOT been paid. It’s usually a pretty easy fix, but you must communicate the situation to your insurance and your mortgage company first. 

How to Change Homeowners Insurance with a mortgage escrow account at OTHER THAN RENEWAL

It’s not quite as straightforward as the above example, but definitely doable. This is where you need an insurance agent willing to walk you through the process and offer solid advice (we do this often). Here’s the typical procedure….

1. Existing policy is cancelled.
2. Refund check is issued to you, the insured (they CANNOT refund to the mortgage company as the policy does not belong to them. They’re only paying the premium on your behalf). 
3. You endorse the refund check and get it to the mortgage company/lender.
4. Mortgage company is billed for the new premium.
5. Mortgagee pays new premium from funds in escrow.

***BIG Assumption
– you are switching to take advantage of premium savings. So it would make sense you have enough money in your escrow account (after depositing the refund check) for the bank to cut a new check. If you don’t you’ll need to make up the difference.

Some banks are really nice in that any additional premium will just be included in the annual “settle-up” of the escrow. When this happens, they’ll just add the amount to your new monthly payment.

Our hope is that after reading this article, you’ll see that changing your Ohio homeowners insurance when you have a mortgage escrow account is very doable. Of course, having an insurance agent that will listen and help you through the process absolutely makes this process the easiest it can be. 

Is it time to make a change? Fill out the form below and we’ll be happy to review your homeowners insurance and help you make the switch!

Let us help get you a great quote today!

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Are you ready to save time, aggravation, and money? The team at Alan Galvez Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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