Escrow – Impound Account and Home Insurance Updates
An Escrow or Impound account serves as a bank account associated but separate from your mortgage loan account. Money is deposited each month thus building up a savings balance until an invoice is presented for home insurance and/or property taxes.
Most mortgage companies pay bills that are presented approximately 2 weeks ahead of the due date and withdraw the amount from your escrow or impound account. The activity is itemized on your monthly loan statement and will show your updated balance each month.
If you wish to change insurance companies, you simply need to purchase a new policy, cancel your prior policy effective the same date that the new policy was written, and notify your mortgage company of the new policy. This change may be done for whatever purpose; a home owner is not required to maintain insurance with any one carrier; however, there are requirements regarding the financial stability of carriers.
If you choose to change carriers mid-term, your present insurance company will process a cancellation and will refund the unearned portion of the premium; it is usual for home insurance to be paid annually. It is important for your new insurance company to list the correct ‘Mortgagee Clause’, Hazard Insurance Department Address and Loan Account Number on your new policy; please note, this is the address that the insurance company will mail the mortgagee copy of the policy to, it is not your mortgage payment remittance address.
It is common for a simple mortgagee clause error to cause difficulties down the road, if the mortgage company doesn’t receive the copy of your home insurance as intended, the mortgage company will place ‘forced insurance’ on the property and mail you notification; spending just a couple of minutes when purchasing your home insurance would avoid this issue.
When cancelling your current home insurance, it is usual for the insurance carrier to request your cancellation request in writing with a current date and signature; carriers don’t do this to be difficult, it is a standard of protection for the insured and release of liability for the insurance company preventing an unintended party from cancelling your home insurance.