Feeling like it’s time for a switch?
If you’re unhappy with your current homeowners insurance or are looking to save more money on your policy, it may be the best time to look into switching to another insurance carrier.
Unfortunately, many policyholders who pay for their current homeowners policy through an escrow account believe switching will be a difficult process. At Berry Insurance, our agents have seen this common misconception cost policyholders potential savings from not having switched earlier.
If you use an escrow account but are looking to switch policies before your renewal, continue reading to see exactly what you can expect from the process.
How do escrow accounts and homeowners insurance work exactly?
An escrow account is where your lender deposits a portion of your monthly mortgage payment to help insure all of the payments for your home are paid on time - covering payments for property taxes, private mortgage insurance, and homeowners insurance.
Your mortgage lender will deposit the escrow amount in your account for each month's payment. Use of an escrow account for insurance payments are typically only required if you have a down payment that is less than 20%. However, any homeowner could request use of one through their mortgage company.
While common myths regarding the complexity of switching carriers with an escrow account still persist, the process is not any harder than if you were paying for the insurance yourself - and successfully switching could reduce your monthly payment or land you better coverage/service.
How can I switch my homeowners insurance with an escrow account?
Homeowners insurance policyholders should follow these steps to successfully switch their policy while they have an escrow account:
1. Gather information and get your declarations page
Before shopping around, it’s best to get an understanding of your current home and its assets - such as square footage or unique exposures that could impact the quote you will receive from new carriers. Obtaining a copy of your current policy’s declarations page and having your current info handy can give you a good understanding of your current coverage limits and where you’re looking to update.
For a complete list of unique exposures in homes that will be sure to have an impact on your insurance premium, check out this article: Unique Exposures that Could Impact your Home Insurance.
2. Begin shopping around
After notifying your insurance agent or provider about wanting to switch carriers, you should begin shopping around and comparing home insurance quotes from multiple companies. Receiving and comparing multiple quotes is a good way to assess how coverage and prices will vary, so you can be sure you’re choosing the right carrier for you.
To know what carriers we recommend the most to our own clients, read our guide on what to look for when selecting an insurance agency or company.
3. Notify your mortgage lender
After speaking with your insurance agent and shopping around your policy, policyholders looking to switch their homeowners insurance midterm should always notify their mortgage company on what’s happening.
Usually, you can expect to receive a refund from your prior insurance carrier of your unused premium and the portion that was paid for escrow upon canceling your policy with them prior to your standard renewal. We advise our clients to speak with their mortgage company to determine if they should place the refund they receive back into the escrow account.
Oftentimes placing the refund into the escrow account makes the most sense because the mortgage company now must pay a new insurance premium, and if the client keeps the refund from the previous policy instead it could potentially deplete the escrow account.
After canceling your old policy and finalizing your new one, you can let your mortgage company do the rest in handling your escrow account for the new policy. Account holders should be aware that, depending on if the refund was put back into the account, you may incur shortages or overages - meaning monthly payments could bounce up and down based on your account standing.
Does switching policies with an escrow account cost any money?
Canceling your policy midterm and switching to a new insurance carrier will not leave you with any switchover fees, but some insurance providers may charge a small short term cancellation fee for canceling before renewal.
Finding the right policy for you
Now that we’ve demystified some common misconceptions and the process of switching carriers with an escrow account, you can move forward with your switch to a better carrier.
It’s important to keep in mind that while saving money on your policy is always a plus, you shouldn’t just be after the lowest priced policy offered by another carrier - as it may not provide you with the comprehensive coverage you need.
For a refresher on what you’ll need when looking for a new homeowners insurance quote, read this article: What Information do I Need for a Personal Insurance Quote?
In addition to this, be prepared for any quote by filling out our personal insurance quote worksheet below:
