Homeowner's insurance is a type of insurance product designed to protect your home and everything in it. Having homeowner's insurance is vital for anyone who owns a house, but it can be expensive. Because of this, you may want to consider escrowing your homeowner's insurance, and here are three things to understand about this.
What it means
Escrowing your homeowner's insurance involves dividing the annual premium you must pay by 12 months in the year, and then paying this portion each month with your mortgage payment. When you do this, you will be paying only one month's worth of home insurance each month, and this money will build up in your escrow account over the year. After you make the last payment, when the year is up, your escrow account will contain enough money to pay your annual premium for your homeowner's insurance coverage.
Why you might be required to do this
Escrowing your homeowner's insurance is often something that lenders require, simply because it makes it easier for people to afford to pay their insurance. Think about this. If your home insurance is $1,200 for the year, could you come up with this amount every year to pay the annual bill? If you think it would be hard to come up with this large lump sum, think about if it would be hard to come up with an extra $100 each month to pay towards it. Most people find that paying $100 a month, versus $1,200 once a year, is much easier to do, and lenders are fully aware of this, which is why they often require it.
Benefits of escrowing your homeowner's insurance
Not only is escrowing your homeowner's insurance premiums easier for a person's budget, but doing this offers other benefits too. One other benefit you can experience from this is not having to pay the actual bill. When you escrow it, you simply write a check for your mortgage payment and the escrow payment all at once. When your homeowner's insurance bill is due, your lender will pay it for you. You will not have to write a check or worry about paying it on time, as the lender will take care of it for you.
If you are not currently happy with the homeowner's insurance policy you have, contact a different company for a quote. When you do this, you can ask them more about escrowing your premiums if you have additional questions about this process.
When you start thinking about getting insurance, it can be overwhelming to hear the advice from family and friends. While some people might encourage you to stockpile money and insure yourself, others might warn about the expense of paying for car repairs or a stay in the hospital. However, even the most conservative financial experts talk about the importance of having sound insurance. Because it can be difficult to find the right policies, I decided to create a website completely dedicated to providing free information about insurance. Every situation is different, but if you are like most people, you will need a decent homeowners, medical, auto, and life insurance policy to protect you from unforeseen circumstances.