When buying or refinancing a home, one of the decisions you’ll need to make is whether or not to escrow your homeowners insurance. While it might sound complicated, the concept is straightforward—and for many homeowners, it can be a smart way to manage insurance payments.
At Eugene C. Yates Insurance Agency, we’ve been helping Sacramento residents understand their options and save on insurance since 1946. Let’s explore what it means to escrow your home insurance and whether it’s the right choice for you.
🔍 What Does It Mean to Escrow Home Insurance?
An escrow account is set up by your mortgage lender to collect and hold funds for paying your property taxes and homeowners insurance. Each month, a portion of your mortgage payment goes into this account. When your insurance premium is due, the lender pays it directly from the escrow balance.
This ensures your insurance and taxes are paid on time—without you having to remember or budget separately for them.
✅ Pros of Escrowing Home Insurance
1. Simplified Budgeting
Instead of one large lump-sum payment every year, your insurance cost is spread out into manageable monthly payments.
2. Automatic Payments
Your lender pays the insurance bill directly, so you don’t have to worry about missing a payment or a lapse in coverage.
3. Peace of Mind
By escrowing your insurance, you ensure continuous coverage and avoid any last-minute surprises when your premium is due.
4. Required by Some Lenders
If you’re putting down less than 20% on your home, many lenders will require escrow for taxes and insurance.
⚠️ Cons of Escrowing Home Insurance
1. Less Flexibility
If you want to switch insurance providers mid-year, coordinating with your lender to update your escrow account can be a hassle.
2. Escrow Shortfalls
If your insurance premium increases, your escrow account may not have enough funds—potentially leading to a shortage and higher monthly payments later.
3. No Interest Earned
The money sitting in your escrow account doesn’t earn interest for you—it stays idle until it’s used to pay your bills.
🏡 When Escrowing Makes Sense
- You’re a first-time homeowner and want help managing large annual payments
- Your lender requires escrow due to a low down payment or loan type (FHA, VA, etc.)
- You prefer predictable monthly payments for easier budgeting
- You want the convenience of automated payments
🤔 When You Might Opt Out of Escrow
- You have more than 20% equity in your home and your lender allows you to waive escrow
- You want to shop for new insurance policies easily and change providers on your own schedule
- You prefer to pay insurance premiums annually and manage your own money
🧠 Final Thoughts: Is Escrow Right for You?
Escrowing home insurance is about simplicity and security. It takes one more task off your plate and ensures your home stays protected. However, if you value financial control and flexibility, managing your own insurance payments may be a better fit.
At Eugene C. Yates Insurance Agency, we can help you compare policies, explain escrow rules, and coordinate with your lender—so you get the best coverage and a smooth process from start to finish.
Let’s Get You the Right Policy at the Right Price
📞 Call today to speak with a Sacramento insurance expert
💻 Or get your free, personalized quote online—fast and easy
Eugene C. Yates Insurance Agency
Serving Sacramento Since 1946
Trusted. Affordable. Local.