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For example, insurance notifications. It sounds boring, doesn't it? But here's why your rate might go up even if you have afixed mortgage, and how we make sure you don't get caught off guard by escrow shortfalls.
Most people who own homes don't know that their escrow account works like a trust fund, with your servicer holding money and paying bills for you. The whole system goes out of whack if you don't tell your insurance company about a change. I've seen this happen hundreds of times in operations, and it almost always ends the same way: surprise payment increases, panicked phone calls, and sometimes, actually scratch that, it's more than sometimes, it's force-placed insurance that costs a fortune more often than it should.
The numbers tell the story. The 2025 Escrow Awareness Survey from LERETA says that only 60% of homeowners really understand how escrow accounts work. This is down from almost 80% a year ago. That's not good, especially since taxes and insurance now make up almost a third of your monthly payment. This is real money, not an idea that is hidden in your mortgage papers.
Let me be clear about something that a lot of people get wrong. You have a fixed-rate mortgage, so you think your payment is set. The part that is the principal and interest? Yes, that's set in stone. But what about the part of the escrow that pays your property taxes and homeowners insurance? That changes all the time, and it has been changing a lot lately.
Think of escrow as insurance for your rate. It keeps you from having to scramble to make big payments when bills are due. Your servicer takes a part of your yearly insurance premium and property taxes every month, puts it in an escrow account, and pays the bills when they are due. Not too hard. But if your insurance premium goes up from $1,200 to $1,500 a year, you suddenly need $300 more in that escrow account. From now on, you will have to pay $25 more each month.
This is the part that gets people. If your premium went up six months ago and you didn't tell your servicer, your escrow account has been getting too little money for six months. You owe $150 more, and you need to pay more each month from now on. Your servicer finds this out during the yearly escrow analysis, and all of a sudden your payment goes up by $40 a month, $25 for the new premium rate and $12–15 to make up the difference over 12 months.
Quadrant Information Services says that the cost of home insurance went up 23% from one year to the next in 2024. That's a big change. A 23% increase means that for a $1,500 annual premium, you'll have to pay $345 more per year, or about $29 more per month, just for insurance. Some homeowners are seeing their total monthly payments go up by $100 to $200 or more when you add in the higher property taxes.
Fairness comes from being open and giving people the right information. If you let your servicer know about changes to your insurance right away, they can recalculate your escrow payment right away. You still pay more because the insurance costs more, but you don't have to deal with the shock of finding out later that you were short and having to catch up for months you've already lived through.
Okay, let's get down to business. You must tell your servicer whenever your insurance changes. End of story. This includes your premiums going up when you renew, switching insurance companies, your carrier dropping you, or changes to the amount of coverage you have.
You need to know what's going on in the insurance market before we go any further. This is important because it affects why this notification process is more important now than it was five years ago.
According to LERETA's 2025 survey, 27% of homeowners were dropped by their insurance companies or told that their policies would not be renewed. More than one in four people. That's a lot higher than what has happened in the past. At the same time, 68% of homeowners said their monthly mortgage payments had gone up over the past two years, and 55% said they were surprised by it.
What is making this happen? A number of things that add up. Since 2020, home prices have gone up 29%, which means that insurers' costs to replace homes have gone up a lot. Disasters caused by climate change are happening more often and are worse. And here's the kicker: the cost of reinsurance has gone up a lot. Reinsurance is like insurance for insurance companies, and when the costs go up, they go straight to homeowners.
The National Bureau of Economic Research looked at over 47 million escrow payment records and found that the average insurance premium went up 33% from 2020 to 2023. There is now a much stronger link between premiums and the risk of a disaster. In 2023, premiums went up by $500 for every standard deviation increase in disaster risk. This was up from $300 in 2018.
Some carriers have stopped doing business in whole states. State Farm, Allstate, and Farmers have either stopped writing new policies or cut back on their coverage in California and Florida. In Texas, where I live, rates have gone up across the board, but at least most carriers are still in business. For the time being. In 2024, American National Group left Colorado completely because it lost money on underwriting.
What This Means for You: It's much more likely that your insurance will change while you're paying off your mortgage. You need to know how to deal with it properly, whether it's a premium increase, switching carriers on your own, or being forced to not renew. What I'm going to tell you about the notification process isn't just a theory; it's something you'll probably need to use.
Here's what happens on the back end once your servicer gets your insurance information. I ran these operations for more than 20 years, so I can show you how they really work.
Now here's the fun part. If this price increase happened six months ago but wasn't reported:
In this case, your payment goes up by $34.50 every month. Not fun, but at least you know where the numbers came from and why.
Let me go over the situations I've seen many times in my work in operations and compliance. These aren't just ideas; they happen in real life.
RESPA says that your servicer must do an escrow analysis at least once a year. This study looks at how much you put into escrow and how much was paid out for taxes and insurance. The goal is to keep the right amount of money in the bank to pay bills on time and have a cushion (usually two months' worth of escrow payments) to deal with changes.
This balance is upset when your insurance premium goes up. For example, your escrow analysis says you need $2,800 to pay for insurance and taxes for the year, plus a $500 buffer. You now need $3,100 plus a cushion if your insurance suddenly costs $300 more a year. But you've only been paying based on the old $2,800 requirement.
This leads to a shortage that is found during the yearly review. The analysis statement shows how much you need to pay each month, how much you owe, and how you can pay it back.
I totally get why homeowners are upset about this. They expect their payments to stay the same with a fixed-rate mortgage. LERETA found that 45% of homeowners wrongly think that their monthly payments can't change with a fixed-rate mortgage. This is up from 36% in 2024. Yes, the principal and interest are fixed. But what about escrow? That changes depending on the real costs of taxes and insurance.
Data from the Intercontinental Exchange shows that insurance and taxes now make up almost a third of the average mortgage payment. This is the highest percentage since they started keeping track in 2014. When prices go up by 10 to 20% in that area, it has a big effect on household budgets. According to a survey by LERETA, half of homeowners said that even a 10% increase in payments would be hard for them.
Instead of just reacting to changes, come up with proactive plans. Here's what really works after almost 30 years in this field.
I've seen these kinds of things happen thousands of times in my career managing operational risk, so I want to be clear about what will happen.
The notification process is mostly the same for all loans, but there are some differences based on the type of loan you have.
You should have these specific resources saved and ready to use.
As the VP of Capital Markets Risk at AmeriSave since March 2025, I can say that our servicing platform makes it easy to make changes to insurance policies. You can upload documents directly to your online account, and our team usually processes them in two to three business days. I've worked in operations in Texas for many years, with teams spread out across the state. I've seen how important timing is for these updates.
I like that our system has proactive communication when it comes to operational risk. If we see that something is wrong with your insurance, like a payment being denied or a cancellation notice, we get in touch with you right away instead of waiting for you to find out. Our escrow analysts know how to explain changes in a way that is easy to understand and doesn't use industry jargon.
If you're getting a mortgage and are worried about how you'll handle escrow and insurance in the future, ask your loan officer how our systems work. We can show you how to do everything before you close so that nothing surprises you later.
Yes, you need to tell them for sure. Your insurance company usually tells your mortgage servicer about changes, but you should send in your updated declarations page as soon as you get it. This makes sure that your servicer has the right information for escrow calculations and stops delays in processing. I've seen times when the insurance company's notice got lost or delayed, which caused problems that could have been avoided if the homeowner had sent the information directly. It only takes five minutes online, and it keeps you from having to deal with escrow shortages or payment surprises later. The 2025 LERETA survey found that 70% of homeowners had to pay more for insurance in the past two years. This isn't unusual; it's becoming the norm. Don't just trust the insurance company's notice; take charge of the process yourself and send your dec page through your servicer's portal or email it to their insurance department with your loan number and property address clearly listed.
Your total monthly mortgage payment goes up by the same amount as the higher insurance cost. If you have a fixed-rate mortgage, the principal and interest part stays the same. The escrow part, on the other hand, goes up to cover the extra premium. If your yearly insurance premium goes up from $1,200 to $1,500, for instance, that means you need to collect an extra $300 a year or $25 a month through escrow. But there is often another problem: your escrow account may not have enough money because it didn't get enough money before the increase happened. Your servicer sends you an escrow analysis that shows the new payment amount and any money you owe. You usually have the choice to pay the difference all at once or over the course of 12 months, which temporarily raises your monthly payment. According to data from the Intercontinental Exchange, insurance and taxes now make up almost a third of the average mortgage payment, the highest percentage since 2014. This means that these increases have a big effect on household budgets. Some homeowners are seeing their monthly bills go up by $100 to $200 or more when insurance and taxes go up at the same time.
Different servicers take different amounts of time to process requests, but most update insurance information within 2 to 10 business days, depending on how the request was made. Most of the time, online submissions through your servicer's portal are the fastest, taking only 2–3 business days to process. It usually takes 3 to 5 business days to get an email submission. It can take 7 to 10 business days plus mailing time to send things in by regular mail. When there are a lot of policies to renew, like after a natural disaster or at the end of the year, processing can take longer. After you send in your information, check your online account about a week later to make sure the update went through correctly. Your account information should show the name of your new insurance company, the policy number, the amount of the premium, and the details of the coverage. If you haven't seen the update after two weeks, call your servicer's customer service department and tell them when and how you submitted your request. Keep your submission confirmation, such as an email receipt, a certified mail tracking number, or an online portal confirmation number, as proof that you sent the information on time. This paperwork is important if there is ever a disagreement about when something happened or whether information was received.
You can definitely switch homeowners insurance companies even if you have an escrow account. Your mortgage lender can't make you use a certain insurance company. You can choose your own as long as it meets the lender's minimum coverage requirements. The most important thing is to handle the changeover correctly so that there are no gaps in coverage. Here's how to do it: First, get new insurance and sign a new policy before canceling your old one. Make sure that the start date of your new policy is the same as the end date of your old policy. Even a one-day gap can cause your lender to charge you for expensive force-placed insurance. Second, if you can, send your mortgage servicer your new declarations page at least 10 business days before the effective date. This will give them time to update their payment systems. Third, call your old insurance company and tell them to cancel your policy on the date that your new coverage starts. If you paid your premium in advance and are canceling in the middle of the term, you should get a prorated refund. You need to know if this refund should go to you or your servicer based on who paid the premium in the first place. Policygenius says that you shouldn't have to pay switchover fees when you change policies, but some companies may charge a small cancellation fee of about $25. After you switch, keep an eye on your escrow account for 2–3 billing cycles to make sure payments go to the right carrier and your old carrier stops getting payments.
Your insurance declarations page, or dec page, is the most important document. This is usually a 1-2 page document from your insurance company that lists your policy details, such as the amount of coverage, the policy's start and end dates, the premium amount, the deductible, the name and contact information of the insurance company, your property address, and the policy number. Your servicer needs all of this information to keep records up to date and make sure your coverage meets lending requirements. Along with your declarations page, you need to send in your full name as it appears on your mortgage, your full loan number, your property's address, and your current contact information, including your email address and phone number. If you're sending your information by email or mail, include a short note explaining the change, like "Please update my insurance information to reflect my new policy with State Farm effective March 1, 2025" or "My annual premium has gone up; please find my updated declarations page attached." If you're switching insurance companies, some servicers may also ask for a cancellation notice from your old carrier showing when your previous coverage ended. Don't send your whole insurance policy; it's dozens of pages long and not needed for servicing. The declarations page has all the information your servicer needs to make the change. If you don't have your dec page right away, call your insurance company or agent. They can usually send you a copy by email or mail within one to two business days.
When your escrow account doesn't have enough money to pay for upcoming taxes and insurance bills and keep the required two-month cushion, that's called an escrow shortage. The difference is usually less than one monthly escrow payment. If your monthly escrow payment is $300 and your account is short $250, that's a shortage. You will get a letter that tells you how much you owe and how much your new monthly payment will be. It will be higher to cover both the higher bills and the shortfall over the next 12 months. You can also pay the difference in one payment to keep your monthly payment lower in the future. An escrow deficiency is worse because it means your escrow account is short by more than one month's payment. If your monthly escrow payment is $300 and your account is short by $450 or more, that's a deficiency. When you have a deficiency, you usually have to pay back part of the shortfall right away, within 30 days, and the rest over 12 months, plus your higher monthly payments for the new bill amounts. According to LERETA's research, both shortages and deficiencies are becoming more common. 68% of homeowners said their payments had gone up in the past two years, with 80% seeing their property taxes go up and 70% seeing their insurance premiums go up. These aren't fines or fees; they are just the higher costs of your property taxes and insurance that have to go through your escrow account to make sure bills are paid on time.
Yes, your insurance company usually sends notices to your mortgage servicer because the servicer is listed on your policy as an interested party or loss payee. Your insurer usually sends a letter or email to your servicer within 5–10 business days after you bind a new policy or renew your current one with a change in premium. But, and this is very important for managing risk, you should never rely only on your insurance company to tell your servicer. In my 28 years in operations, I've done enough of these kinds of deals to know that things go wrong all the time. Sometimes insurance companies forget to send the notice or send it to the wrong servicer if your loan was recently transferred. Documents get lost in the mail, emails go to spam folders, faxes don't go through, and so on. Even if the insurance company does send a notice, the servicer may take longer to process it during busy times. By sending your declarations page directly to your servicer ahead of time, you can control when it gets there and make sure it gets to the right place. You could say that the process has built-in redundancy: your insurance company sends their notice and you send yours, so there's a backup. This is especially important if you're changing carriers or your old policy was canceled. In these cases, quick coordination is needed to make sure there are no gaps in coverage. According to LERETA's survey, 81% of borrowers think their mortgage company gives them enough information about their escrow account. However, that means that almost 20% don't, often because of communication problems that proactive notification can help avoid.
Don't panic right away, but do act quickly because time is of the essence. If your insurance company sends you a cancellation or non-renewal notice, you usually have 30 to 120 days, depending on your state's laws and the reason for the cancellation, to find new coverage. Don't wait until the last week to start looking for new coverage. Recent data shows that 27% of homeowners lost their insurance or got non-renewal notices in 2024–2025, so you are not alone. If you want to find the right coverage for your situation, you should talk to several insurance agents or brokers and be honest about why your last policy was canceled or not renewed. If you can't find insurance in the regular market, you might want to look into excess and surplus lines carriers that focus on higher-risk properties. If you live in one of the 34 states plus DC that offers this option, you might also want to look into your state's FAIR Plan. FAIR Plans offer basic coverage when private insurers won't, but they usually cost more and have less coverage than regular policies. As soon as you get new insurance, send your mortgage servicer your new declarations page along with a note saying that your old carrier didn't renew your policy. This paperwork helps keep things clear and makes sure they know why the carrier changed. To avoid any gaps in coverage, make sure that the start date of your new policy is the same as the end date of your old policy. Even one day without coverage can trigger force-placed insurance. If you can't find any coverage before your current policy ends, call your mortgage servicer right away and tell them what's going on. They might give advice or short-term extensions to keep you from getting force-placed insurance, but this isn't certain. Force-placed insurance is two to three times more expensive than regular insurance and only covers the lender's interest, not your personal property or liability. You should avoid it at all costs.
In some cases, you can get rid of your escrow account, which is also known as an escrow waiver. However, there are certain conditions that must be met. To ask for escrow removal on a conventional loan, you usually need to have at least 20% equity in your home, which means your loan-to-value ratio is 80% or less. Get in touch with your mortgage servicer and ask for an escrow waiver or the closing of your escrow account. They will give you the forms you need and may charge a one-time fee, which is usually between $250 and $500. But there are some important things to think about before going this way. First, FHA loans require escrow accounts for the life of the loan and can't be removed. VA and USDA loans also usually require escrow accounts for the whole loan. Second, if you are allowed to remove escrow, you will have to budget and make lump-sum payments for property taxes and insurance when they are due. LERETA's data shows that 80% of mortgage holders have escrow accounts. Many of them keep them even when they could remove them because automatic monthly collection and payment makes things easier and gives them peace of mind. Third, some investors who own your mortgage won't let you remove the escrow, no matter how much equity you have, and your servicer has to follow the investor's rules. If your request is approved, you will get back the money in your escrow account, minus any bills that are due soon. Your monthly payment will then only be for principal and interest. But you have to pay property taxes and insurance directly to those companies on time. If you miss a payment, you could break the terms of your mortgage and have to pay for force-placed insurance or tax liens. Quadrant Information Services says that insurance premiums went up 23% from 2023 to 2024. Because of this, it takes a lot of financial discipline to plan for these big payments. I have run escrow operations for 20 years, and I think most homeowners are better off keeping their escrow accounts unless they have a good reason to get rid of them and are good at managing their money.
No, your mortgage company can't make you use a certain insurance company. Lenders can't force you to buy insurance from a certain company or agent because of federal law and rules. You can choose any homeowners insurance company you want as long as the policy meets the lender's minimum coverage requirements. Most of the time, these requirements include coverage equal to at least the loan amount or the property's replacement value, whichever is less. The lender must be listed as both the loss payee and the mortgagee. Some types of coverage, like fire, wind, and liability, are required, and in some cases, like flood insurance if you're in a designated flood zone, specific endorsements are also required. You can choose the carrier, coverage amounts above the minimums, deductible levels, and other policy features beyond these basic ones. If your mortgage servicer suggests or recommends certain insurance companies, they may be giving you useful information based on the companies they work with a lot or that have simple processes. However, you don't have to follow their advice. According to the Consumer Financial Protection Bureau, comparing quotes from different insurers can save you hundreds of dollars a year on premiums. This is why shopping around is a good way to manage your money. If you ever feel like you have to use a certain carrier or your lender tries to make you use a certain insurance company outside of force-placed insurance in certain situations when you've let your coverage lapse, that could be against the law and you should report it to the CFPB and your state's insurance regulatory agency. The only time your lender can buy insurance for you is if you let your own coverage lapse or don't show proof of insurance. Force-placed insurance is costly and doesn't cover much, so it's always better to keep your own policy with a company of your choice, both in terms of cost and coverage.
No one wants to deal with mortgage servicers, escrow accounts, and changes to insurance. I know that these administrative tasks feel like just one more thing on your already full plate because I've worked in every part of this industry for 28 years, from operations to underwriting to compliance to capital markets risk.
But this is the truth. Your house is probably the most valuable thing you own. The systems we've set up around mortgages and escrow are there to protect that asset and make sure it stays insured all the time, even when life gets busy. You're not just following rules or checking boxes when you tell your mortgage servicer about changes to your insurance. You're also protecting yourself from problems that get worse over time and cost a lot of money.
To say the least, the insurance market in 2025 is going to be hard. Premiums are going up faster than they have in decades, some carriers are leaving some markets completely, and more homeowners than ever are having policy changes they didn't ask for or want. You can get through these changes without too much stress or financial strain if you know how the process works and take steps to manage it.
When you switch insurance companies or renew your policy, take five minutes. Put that declarations page on the portal for your servicer. Send that email with your loan number in big letters. Call them again to make sure they did what you asked. Your future self will thank your present self for staying on top of things and not being surprised by a payment increase you weren't expecting.
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