How Are They Connected?
The Relationship Between Your Home Insurance and Your Mortgage
While homeowners insurance is not part of your loan and is your responsibility to purchase, your monthly insurance premium may be included in your monthly mortgage statements. The Fred C. Church team provides more information below about the connection between your home insurance and your mortgage.
Why do lenders require you to get home insurance?
You may think that the main point of having homeowners insurance is to provide you with important coverage if something happens to your home, personal belongings, or a guest on your property. All true. But your lender also wants you to have home insurance because they see it as critical protection for the substantial financial investment they are making in your home.
For this reason, when you went through the home mortgage approval process, one of the conditions you likely had to satisfy was getting the proper amount of homeowners insurance for the value of your home and property. Once obtained, proof of this insurance needed to be shared with the lender before the closing. However, because your lender doesn’t offer homeowners insurance, you had to undertake a completely separate process with Fred C. Church, or another local insurance professional, to get the right coverage.
Why did your lender create an escrow account for your home insurance?
While homeowners insurance is not included in your mortgage, it can be added to your mortgage payment through an escrow account set up by your lender. If you are a first-time homebuyer or made a down payment of less than 20%, your lender probably required you to have an escrow account. However, just because you were obligated to have it doesn’t make an escrow account a bad thing.
On the contrary, a home mortgage escrow account generally benefits both you and your lender because it facilitates the payment of property-related expenses, like home insurance, private mortgage insurance (PMI), and real estate taxes. You get help managing all these bills, and your lender gets peace of mind that these costs will be paid on time.
If your home loan didn’t include an escrow account, you would be responsible for these large bills when they came due once or twice a year. With an escrow account, you pay smaller amounts each month for your home insurance, PMI, and taxes, which are bundled together with your mortgage payment. When your insurance bill comes due, your lender will use the money that has accumulated in the escrow account to pay your home insurance company.
In case you are wondering, an escrow account will not make your home insurance premium more expensive; however, it should make it a whole lot easier and convenient to manage and pay.
What happens to your home insurance if you pay off your mortgage?
It’s an amazing feeling to pay off the mortgage on your home, become sole owner of your property, and have no more obligations to your lender. It doesn’t mean, though, that your homeowners insurance goes away. Granted, since you paid off your mortgage, there is no longer a requirement for you to carry home insurance. However, it probably doesn’t surprise you that we strongly recommend you maintain your homeowners policy because it provides such important protection.
If you take our advice and continue with your coverage, the biggest change to your insurance process will be that you’re now the one paying your insurance bill. To make sure that the new billing information is updated appropriately, you can contact your insurance company directly or reach out to Fred C. Church. All our insurance providers offer numerous payment schedule options and ways to pay, as well as access to online account management, so you can continue to enjoy a simple and convenient home insurance process.
Talk to an insurance professional about your homeowner risks.
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Everyone I have ever dealt with at Fred C. Church has always provided me with the best service, and that continued today. You were helpful, kind, and so prompt with getting me what I needed, and I appreciate it so much!
Thank you very much for all your help with my Dad’s car insurance needs as well as my own insurance. Awesome service!
You are SO wonderful. Thank you for being the best agent. Much, much appreciated. 🙂
You are all experts in your field and you made my worries go away in minutes. I truly appreciate you and all the staff.
You probably get tired of me saying this, but thanks again for all your help. You made the whole process go so smoothly. Again, I thank you.
If you are looking for knowledgeable people who can walk you through the most complex insurance matter, these guys are for you! Good listeners, problem solvers, careful and comprehensive. They aren’t kidding: people do come first here. Five stars is not enough.
Super helpful and available folks. Awesome place!
I have never viewed an insurance agent like a close trusted financial professional such as my accountant, lawyer or financial advisor but always felt maybe I was missing something. Now I know that I was missing out and that I have filled this gap at the same time.