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Premium Payment Concerns When Changing Home Insurance Companies

Are you changing home insurance companies?

Home Insurance paid with mortgage escrow | Huff Insurance | Pasadena, MD

If you are changing home insurance companies, besides comparing the coverage, here are a couple of things to keep in mind.

  1. How is the new policy getting paid? Who pays for your home insurance premiums?
  2. When do you cancel the old home insurance policy?

Who pays your home insurance premiums?

  • You
  • Your lender through mortgage escrow

Are you are paying your insurance premium directly?

If so, then there is no question about who is paying the new premiums when you are changing home insurance companies.  You would send a request to cancel the old policy and then pay the bill for the new insurance policy.

Does your bank or lender pay for your home insurance premiums?

If so, then when you change home insurance companies can determine who is paying for the new policy.

What if your bank does not pay for the new policy mid term?

If you are changing home insurance policies mid term, then you may be responsible to pay for the premiums for the new policy.  Most lenders set up the escrow account to pay home insurance premiums once per year.  So if they already paid for your home insurance policy at inception, they may not be willing to also pay for the new policy premium.  The good news is that when you cancel your old home insurance policy, any refund will come directly to you.

What happens if your bank does pay for the new policy mid term?

When changing home insurance policies, we have seen some banks that will pay for the new policy mid term.  Some banks will pay for the home insurance when they receive the new invoice.  In this case, they have essentially paid for two insurance policies in a single year’s time.  Doing so, may cause your escrow balance to fall below their acceptable threshold.  So when you cancel the old policy and get the refund, we usually advise our clients to send that refund to their bank and apply it all to their escrow account.  This will help ensure that the escrow account is not shorted and that their monthly payment will stay in line upon the annual escrow account review.

Are you changing your home insurance company at your policy renewal date?

If you are changing your home insurance at the policy renewal, there are some important time frames to keep in mind.

Insurance companies can send the policy renewal offer and invoice out up to 60 days prior to the renewal date.

So, if you are changing home insurance companies within 60 days of your renewal date, you need to do a couple of things.

Notify your lender right away that you are changing companies

  • If they have not yet paid the home insurance renewal, let them know that you are changing companies and to not pay the old company.  Get them a copy of the new policy and invoice to pay the new company.  They may also want to see the cancellation form for the old policy.
  • What if they already paid the old policy?  If the bank has already paid the old policy, then contact them to see how they want to handle paying for the new policy.  They can handle is a couple of different ways:
      1. They will pay for the new policy.  Some banks will do this to make sure that the new policy is actually paid for.  If they do this then you need to see how they want to handle the refund for the old policy.  Odds are that they will want you to send the refund back to them so they can apply it to your escrow account balance.  Doing this will help prevent a deficiency in your escrow account like we described above.
      2. They will not pay for the new policy.  In this case, you will have to pay for the new policy yourself.  But, like we described above, when you cancel your old insurance policy, the refund will come directly to you to keep.

Some of the direct or online insurance companies that may not have this conversation with you when you are changing your home insurance policy.  This can cause unwanted stress and confusion.  

Call Huff Insurance today to discuss this or any other insurance issues.

Your insurance agent should let you know of these scenarios when talking to you about changing your home insurance company.  If they are not, then do not hesitate to call one of our agents to help you.

Huff Insurance is an independent insurance agent that can handle all of your insurance needs.  We offer a wide variety of solutions for personal insurance and business insurance.

Need to find a lender to refinance your home?

Check out our blog on home refinancing with the link below and use the form on that page to request a lender referral.  We know several top local lenders that can help you with your refinance.  We do not receive any fees or renumerations for referring them.  Huff Insurance refers them because we trust them to handle your business.

Things to do with homeowners insurance when refinancing your mortgage?

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