How to Explain How an Escow Works for Homeowner Insurance

[doorknocker]

I am pretty new in the business and had a client ask me a good question tonight that I should have been able to answer. We were changing his home insurance and saving him about $400 a year. His renewal was April 15th and he wanted to know what would happen if his old premium was already "paid" through escrow and if so what would we do. I said he would get all unused premium back but I don't even know how the whole process works. Any advice on how to make this make sense would be appreciated.

 

[JCK818]

Two ways to do this. He pays the down payment, you send the policy to his lender, they will replace it and refund him on the old policy. I just did one where i sent the policy with a pending a policy number to BofA, with a bill for the amount. THey paid the whole thing

 

[Lyn]

I am pretty new in the business and had a client ask me a good question tonight that I should have been able to answer. We were changing his home insurance and saving him about $400 a year. His renewal was April 15th and he wanted to know what would happen if his old premium was already "paid" through escrow and if so what would we do. I said he would get all unused premium back but I don't even know how the whole process works. Any advice on how to make this make sense would be appreciated.

You send a copy of the binder to mortgagee and customer cancels old policy. If mortgage company has already paid out, most will pay again knowing the customer will probably get a refund which you should have reminded them not to spend but rather send it to their mortgage company with instructions to deposit it to their escrow account. Otherwise when mortgage company audits their account at year end (or mid-year) the escrow will be below minimum requirements and their house payment will go up.

 

[TiredAgent]

It all over the board. Some lenders will make the Insured
pay the new policy out of pocket and will pay the new company at anniversary.

If the return premium goes back to the lender they'll post it as a credit, but your Insured has to keep of top of it, lenders tend to forget about getting money and putting it where it belongs.

 

[Texasproducer]

Conference call him with the mortgage company and they'll explain everything and you can verbally update everything so you know payment is on the way.

 

[bree4479]

Mortgage companies won't pay twice in one year for homeowners premiums. Cancel old homeowners policy. He will get refund on that he can put right into his checking account. Pay new policy in full out of his own pocket and set up through carrier to bill mortgage company for the renewal.

 

[joshb]

Mortgage companies won't pay twice in one year for homeowners premiums. Cancel old homeowners policy. He will get refund on that he can put right into his checking account. Pay new policy in full out of his own pocket and set up through carrier to bill mortgage company for the renewal.

Not necessarily true. Most large mortgage companies will make a second payment in a year as long as you inform the insured to put the refund back in escrow.

I try to handle everything for the customer, so they think its not a hassle to switch to my agency. Heres what I do once they accept my offer, I call the mortgage company and request a payment and update the insurance information. They usually want authorization from the insured, so I get them in on the conference call. At that point the mortgage company will say thanks payment will be sent (I always request for it overnighted to my office, that way I know its been done, as I have had mortgage companies "forget" to make the payment). When I have the insured sign the apps, I also have them sign a cancelation request to cancel their current/prior policy and I'll send it in to them company for them, this way I don't give the other agent one last opportunity to save his business. I have saved a ton of business because the other agent didn't do this. When I'm done with the customer, I let them know they will receive a refund check and let them know each mortgage company is different and require different things, so you may want to call them and see what they want you to do with it (if I didn't ask when I was on the phone with the mortgage company; usually I do though), or to be on the safe side, just put the refund back in the escrow account and wait until the end of the year when they conduct an escrow anaylysis in which they will return overpayments to you, or request a payment if your account is short.

 

[markschneider86]

Make sure not to forget to tell the client to deposit the refund from the old insurance, back into the escrow account.

 

[JimmiDrums]

Each mortgage company is different. They should usually allow their client to cancel their current policy and purchase a new policy, and quite often they'll pay for the new policy before receiving a refund from the previous carrier.

Just get your customers mortgage/escrow info first and give them a call to see how they handle this situation. You may need to get the customer included on a conference call to pacify the lender.