Escrow and Switching Insurance

Paying homeowner or condo insurance with escrow shouldn’t discourage you from switching. Here’s what you need to know.

Your monthly mortgage payment may include an amount that is reserved in an “escrow” account and used to pay your annual property taxes and homeowner or condo owner insurance premiums. If this is the case for you, part of your process for switching insurance is to let the mortgage company know about the new insurance. Your mortgage company can help you with this—they do it all the time!

  • Paying insurance through escrow is actually a way to help you save money by having monthly insurance payments while benefitting from an annual insurance rate.
  • You probably have money in your escrow account now that can be used to pay part of the cost of the new insurance policy.
  • You will need to pay the difference between the cost of the new insurance policy and the amount currently in your escrow account. You will recover most of that (or more than that) when you receive the refund check from the cancelled policy.
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What is an escrow account?

Many homeowners with a mortgage pay into their escrow account along with their monthly mortgage payments. The mortgage company keeps the escrow amount and forwards the money to the homeowner or condo insurance company when payments are due.

Escrow accounts are helpful for most people because they provide a simple way to “save up” for the annual expenses of taxes and homeowner or condo insurance, plus they lower the cost of insurance by paying the premiums in full once a year instead of monthly.

Since the mortgage company pays your insurance on your behalf, you need to tell them whenever you make a switch.

What to do about your escrow account when you switch insurance

When you find a new homeowner or condo insurance policy, contact the mortgage company to tell them that you are canceling the current insurance and buying a new policy. They will need to know:

  • The name and address of the current insurance company, and your policy number
  • The name and address of the new insurance company, and your policy number
  • The mortgage loan number
  • The cancellation date of the current policy and the effective date of the new one (date will be the same)


It’s your choice whether you or the escrow company pays the first payment of your insurance policy. Since there is probably already money in your escrow account, it may be easier for you to fund the escrow account the rest of the way and have them make the first payment.

You can also expect a refund from your current insurance company after the policy cancellation unless you are making the switch at exactly the end of a policy term. You will need to pay the difference between the cost of the new insurance policy and the amount currently in your escrow before you get the refund check from your current insurance company. This is because the insurance company probably won’t send you a check until after your policy cancels. They also usually send refund checks by paper mail, which takes time.

Once your escrow company has made the first payment to the new insurance company, your escrow should be all set up and you will enjoy the benefits of having your escrow account until you re-shop your insurance and switch again.

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