You Might Get a Refund, and It Might Be Complicated
If you recently switched homeowners insurance providers, you may have received a check in the mail from your previous insurer. This often happens when you've paid your premium in advance, and your new policy overlaps with the old one. But even though the check may be made out to you, it's not necessarily yours to spend.
In fact, many Georgia homeowners, particularly in Metro Atlanta where escrowed mortgage accounts are common, find themselves surprised when their mortgage company sends a letter requesting that refund back.
The reason is simple though: in many cases, the previous insurance premium was paid in full using funds from your mortgage escrow account. So in a way, your escrow account is receiving the refund, not you personally.
The Problem With the Check
The complication often arises when the refund check is made payable only to you. Some checks even lack a designated space for endorsement, especially those issued electronically or printed at home.
Seeing a letter like this for the first time can be bewildering to new homeowners. After all, it’s not an unreasonable assumption to think that these details would be sorted out between the insurance agency and the mortgage lender.
In these circumstances, a couple of big questions come up:
- If the check is in my name, how can my mortgage company deposit it?
- Should I risk mailing it in without any clear way to endorse it?
First Things First: Make a Phone Call
Before you attempt to deposit the check yourself or send it to your mortgage company, it’s best to contact your mortgage servicer directly. This is the company that handles your mortgage payments and manages your escrow account. Let them know you’ve received a refund from your prior insurance carrier and that the check is made out solely to you.
They’ll typically walk you through the preferred method of returning the funds. In some cases, they may instruct you to endorse the check and mail it to a specific PO Box. In others, they may tell you to deposit the refund into your personal bank account and then submit the funds separately, either through an online payment portal or by sending in a personal check referencing your escrow account number.
Why It’s Important to Get It Right
This is what financiers call “A Big Deal” (okay, I made that up… but it is a big deal). Procrastinating on getting the refund back to your mortgage servicer can lead to major headaches that can be completely avoided.
If your mortgage company paid the premium and doesn’t receive the refund, your escrow balance could be off. So if you hang on to that refund check too long, whether because you forgot about it or just hadn’t gotten around to it, the mortgage company will find you in violation of your mortgage agreement.
This can result in a shortage analysis, where your monthly mortgage payments are recalculated to make up the difference. This often results in hundreds of dollars being added to your monthly mortgage payment.
In extreme cases, it may even flag a deficiency that could impact your mortgage status. That’s why it’s critical to either return the refund promptly or confirm in writing how it should be handled.
What If There’s No Way to Endorse the Check?
This is a common issue with certain digital or third-party checks. If there’s no clear endorsement area or if you’re concerned about the check being rejected, ask your mortgage company if they will accept an alternative form of repayment.
Depositing the check into your account and sending them a personal payment is often the simplest route, but only do this if you’ve confirmed it’s acceptable with them.
Never endorse the check over to your mortgage company without their explicit instruction. Some institutions do not accept third-party checks due to anti-fraud policies. If the mortgage servicer is unable or unwilling to accept the check as-is, you may be able to request a reissued check made payable jointly to both you and the servicer. This process takes some time though, and includes a bit more paperwork.
The Takeaway for Georgia Homeowners
Switching insurance providers is a savvy move in today’s high cost market, especially for Metro Atlanta residents seeing rising premiums. But the paperwork that follows can be tricky. When it comes to insurance refunds and mortgage escrow accounts, the key is communication and documentation.
Don’t assume the check is yours to keep just because your name is on it. Call your mortgage servicer, explain the situation, and follow their guidance. Make sure as well to keep records of all correspondence and payments.
That small check might seem like a minor detail, but handling it the right way ensures your escrow stays balanced and your mortgage stays on track.