I Switched My Homeowners Insurance and Got a Refund. What Should I Do?
Sorry, but this is the only right answer: You should immediately deposit your insurance refund check into your escrow account.
Your mortgage servicer uses your escrow account to hold money in reserve for your homeowners insurance and property taxes. If you don’t deposit the check right away, you could end up with an escrow account shortage or delayed homeowners insurance payments. Even if the words “escrow account shortage” mean bupkis to you, trust us: If you can avoid having one, it’s best to do so.
Why did you get an insurance refund check in the first place? Because your escrow account had already made insurance premium payments to your old insurance carrier. If you cancel your coverage, your old carrier must provide a prorated refund for those payments to you (subject to policy terms).
Now, we know it’s fun to get a big check in the mail. It’s tempting to use those funds for whatever want or need feels most immediate. Resist the urge! Because those funds are FOR YOUR ESCROW ACCOUNT. So here’s what to do instead: Contact your mortgage servicer. Ask them how they’d prefer to receive your refund check (e.g., via mail, electronic deposit, or in person). Also ask for an updated escrow analysis, so you understand whether your escrow account will be overpaid or underpaid following your deposit.
Still have questions about the ins and outs of switching your insurance? Heyo, we’ve got answers! Check out our step-by-step guide on how to switch homeowners insurance providers, or give us a shout. One of our expert insurance advisers will be happy to answer your questions, totally free of charge or obligation.