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When I worked in an insurance office one of the number one most annoying tasks for both me an my insurance customers were the change of Mortgage Information for homeowners. This was especially confusing when the insurance customer is paying into an Escrow Account in order to cover the insurance premiums.
An escrow account is something offered by mortgage and finance companies to collect Mortgage insurance, Homeowners insurance premiums and in some cases even property taxes. Escrow accounts can be a great way to avoid a large bill hitting once a year by collecting equal monthly payments through the year.
The mortgage finance company computes the insurance and tax costs and then breaks the annual costs into equal monthly payments. When monthly mortgage payments are made a portion will be kept in the escrow account. When the homeowner insurance premium comes due the insurance company bills the mortgage company. The mortgage company pays the insurance bill, and may adjust the escrow payment amount based on any changed in your insurance rates.
An escrow account works very well when everything goes smoothly, but as is the case with most great ideas there are always those things that can cause a glitch. The number one reason a homeowner may actually receive notice of cancellation due to non-payment or have their homeowner insurance lapse is when the mortgage company isn’t correctly listed or billed. Often, homeowners first clue something is wrong is a notice of cancellation for non-payment of the renewal premium.
The general cause for this kind of problem is when a home loan has been transferred or sold from one finance company to another. The homeowner usually gets some sort of notice, new payment coupons and theoretically the insurance company is given notice of a change in Mortgage Information. When everyone does their job and enters the correct information and makes the correct changes things should go without too many problems.
The best advice I can offer is to review your homeowner insurance renewal notice and double check to be sure your mortgage company, bank or other financial institutions are listed correctly and that the escrow account pays the renewal premium.
Related Blogs:
- Basic Homeowner Insurance Forms
- Household Inventory–Getting Started.
- Flood Insurance
- Earthquake Insurance
Glossary of Insurance Terms:
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