As is the case at the start of every year, I receive an escrow summary from my mortgage provider. An escrow is the funding account for the variable part of your mortgage payment that includes property taxes, insurance and HOA fees in some cases. The escrow amount is added to the fixed principal and interest of the monthly mortgage payment, is typically adjusted annually, as lenders review for overages or shortages. Federal law allows lenders to keep a cushion of up to two months’ total escrow payments. But, as the homeowner you are ultimately responsible for all tax and insurance payments. So you would do well to keep your eye on escrow payments, all of which should be on your monthly mortgage statement.
My annual escrow summary stated that I owed an additional $94 to cover under-funding of the escrow account. Scrolling down the document I realized that during the year my home owners insurance had jumped from $520 to $721. The increase in insurance was what caused my escrow account to become under funded. When I went back and checked my policy, my hand written scrawl indicated that I had indeed called my insurance company (Allstate) and asked them why my home insurance premium had increased. The agent had said that it was due to higher thefts in the local area and general underwriting rate increases. But a 38% rise is still pretty drastic and I had put a note to myself that said “Shop around for cheaper insurance!” But I guess I must have forgotten to follow through, until the nasty reminder through my annual escrow statement. So while an escrow statement can automate a number of home related periodic payments, it also means that unless you pay attention you can make costly oversights like I had.
So this time I decided to follow through and see if there was a way I could do something about the home insurance premium increase. I called Allstate, with whom I also have my auto insurance, and asked them again about the increase. To their credit, they gave the same answer as previously stated and the agent said that Allstate could not provide a lower rate for my home. Even more surprisingly, they suggested another insurance company – Liberty Mutual - to try and get a better home insurance quote. So I called them, who despite an excellent customer service agent, could not beat the higher rate either.
I was starting to give up and beginning to accept the higher home insurance premium. But I decided to do a Google search for cheaper home owners insurance and amongst the top results I ended up finding a number of insurance portals that allowed me to get multiple free quotes in place. These portal sites are basically insurance quote aggregation providers that use the information you provide to find matching quotes across a number of primary insurers (like All State, State Farm etc). These sites are not insurance brokers or insurance providers, and instead earn commissions from referrals they provides to insurance companies.
Portal sites are a good place to start because they streamline the search process for you and provide a range of free quotes across providers. You can then use the quotes to negotiate with your current provider or go with one of the reputable companies that can hopefully meet your home insurance needs at a lower cost.
Fortunately, I was able to find a lower comparable quote from Farmers through an insurance portal. I did call up Allstate to check if they would match, but were unable to do so. This made the decision to sign-up with my new provider easier, despite losing my multi-policy discount. Now, I have to call my mortgage company to adjust my escrow account for 2012 to reflect the lower premium! The whole process took about one hour, and the savings were well worth the time and effort.