Sometimes we may have to rewrite a policy at renewal or even during the middle of the policy period. If the customer has their premium paid by the lender, the billing may be a little confusing. What if the lender has already paid the previous insurance policy before it was rewritten? What happens if you get a refund from the previous insurance company for the prorated amount?
The refunds will be sent to the customer, not the lender. Why is this? Well, it is actually your money, not the lender’s money. The insurance company sends it to you to simplify the process. What you do with the money is up to you.
We recommend that you add the refund amount to your next payment to your mortgage company, but be sure to notify the company that the additional amount is to be applied to your escrow. If you do not return it to the lender, you will likely see an adjustment to your monthly mortgage payment because they will need to recalculate your escrow amount, since they paid more for the insurance policy on an annual basis than what they had originally estimated.
Also, remember to notify your insurance company when you switch your home insurance. Yes, the lender will automatically get a mailed copy of the declaration page and invoice, but if they do not get notified of the change by the customer, oftentimes they may discard it because their notes will show that the insurance has already been paid.
At Schneider and Associates Insurance Agencies, we will try to notify the lender of the change via fax or phone, but most of the time, the agent is told that they are unable to make changes to a policy without permission from the customer. Plus, they usually ask for date of birth and social security in order to verify the account which makes it difficult for us to handle for our clients.