Each year, millions of Americans elect to pay the cost of their homeowners insurance as part of their monthly mortgage payment, commonly referred to as “escrow”. In this process, your homeowners insurance company will actually bill your lender, and the lender will pay the yearly premium on your behalf using the funds that were “escrowed” throughout the year. The main reason why mortgagors elect to do this is purely for budgetary reasons. They want to ensure that during the year they slowly escrow enough money so when their policy comes up for renewal, it gets paid and coverage on the home continues.

However, the main problem I see with people escrowing funds for homeowners premiums is that the policy often takes on a “set it and forget it” mentality. A prospective client once said to me, “Oh, I can’t move my homeowners policy…it’s locked into my mortgage”. This is simply not the case. As the homeowner, you have the right to shop your homeowners policy whenever you choose. Moreover, in many cases, I have been able to save clients enough money on their homeowners insurance so they could renegotiate the monthly payments with their lender.  A lower homeowners premium requires less money to be escrowed each month, and from my experience most lenders will allow the homeowner to adjust their monthly payment accordingly.

Wishing you all a safe holiday season, and remember, don’t buy insurance online. As your local agent I am trained, licensed, and experienced. Your computer isn’t.

Chris Mazza

Owner, Central Penn Insurance Agency