Addresses, Corporate Changes, and Paying Attention to the Details

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A few days ago, in the mail, I received a notice from my homeowners insurance company notifying me that they were cancelling my policy as of January 18 due to a lack of payment. I was shocked, to say the least.

Back when we first bought our home and arranged our mortgage, the mortgage company offered to set up an escrow account for us. Each month, we would pay a certain amount into that escrow account and, from that account, they would manage the homeowners insurance and the property taxes on our home. After running the numbers and realizing that this would actually save us a fair amount of effort, we signed up for this program.

Flash forward a year later. Our insurance company was purchased by a second insurance company. To us, this seemed like a mere formality. We received a new policy in the mail and similar information was sent to our mortgage company. We kept making our monthly mortgage payment like clockwork, keeping money in the coffers for our insurance.

Then, suddenly, out of the blue, a notice about policy cancellation due to a lack of a payment?

Naturally, I spent the next two hours on the phone tracking down the problem. The problem itself was incredibly simple. My mortgage company failed to convert the records on my escrow account to refer to the new insurance company. Thus, when they received solicitations for payment from the new mortgage company, they checked my records, discovered they did not match, and assumed that there was some sort of error (or perhaps some sort of nefarious activity).

Everything was resolved with three phone calls, however, and everything is in place with no loss of insurance on my home. However, I did learn a few things in the process.

First, when there is an address change of any sort, make sure you contact the relevant people. Yes, others may actually be responsible for this. Yes, they should have already been notified by someone else. But at the same time, people are human and make human choices and human mistakes, which is what the problem was here.

Be proactive. If one of the companies you do business with changes an account number or an address, consider it your responsibility to make sure it is changed everywhere it needs to be, regardless of whether or not it’s ultimately your responsibility. Taking care of it now – and making sure it’s done right – can save you a big headache later on.

Second, read all of your notices. Even though I’m supposedly on the “paperless” plan for several of my bills, I still receive oodles of statements and messages from these companies. Most of them are completely unimportant to me. They inform me of very minor things like changes in terms of service, new “offers” that I can’t live without, and newsletters with articles that don’t interest me.

After a while, it’s very easy to become numb to all of it. Don’t. Open every one, read it over, and handle it appropriately. Yes, most of them will go in the trash can. Yes, you’ll often feel like you just wasted fifteen minutes of your life.

But for every fifty useless missives that you read, one will be very important. This little notice looked like several others I’ve received from the same company and none of the others were important at all. Had I attacked it with glossy eyes, who knows what may have happened.

Finally – and perhaps most importantly – don’t get irate with customer service representatives. Most of the time, the customer service folks you talk to on the phone have spent most of their day dealing with irate, rude people demanding various things of them, often over the top ridiculous things, and are treated rudely in the process. A little bit of honey goes a long way. Even if you’re upset and angry with the situation, remember that it’s not the fault of the person you’re talking to. Almost always, they’re trying to help you out to the best of their ability. Yes, it feels good to vent, but don’t vent at the person who is trying to help you.

Thankfully, everything is in order now, and I’ve learned a good lesson in being proactive.

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26 thoughts on “Addresses, Corporate Changes, and Paying Attention to the Details

  1. This same thing happened to me – TWICE.

    I had bought my house. Our lawyer from the closing did not mail the check to the insurance company.

    One week into living there, we got a notice saying our policy had been redacted. We had to start tracking it down and finally got ahold of the lawyer, who admitted to ‘fumbling’ it, and got it straightened out for us.

    One year later. Our insurance policy is purchased by another company. Our bank somehow wasn’t notified, so they sent payment to the original insurance company. Who refunded us the check, and at the same time we got a notice of non-payment.

    We ended up having to cash the check, then write a new check to the new company to straighten out, and call the bank and fix our escrow account.

    Here’s to hoping it goes through all right this year…

  2. Yes, read everything that comes in the mail! We got (yet another) silly “update” for a store credit card, and I was tempted to just file and forget it. But when I read the fine print, I saw that the company would start charging $1 per month to send paper statements… on a card that I rarely use but keep for the perks. I signed up for electronic statements that day.

  3. though i must say I get a notice every month for my mortgage informing me it was sold from GMAC to Ally, then Ally, back to GMAC and again back to Ally. Seems a vicious cycle and they are supposed to be the same bank I thought…

  4. After spending 2 hours on the phone to fix their potentially disastrous error, do you still feel that having your mtg co. handle this payment is worth it?

    Seriously, you could have been out of town when the notice came, dropped and if a pipe broke in your home (common in the winter) the damage wouldn’t be covered.

    It takes me about 30 seconds a year to send an electronic payment to the insurance company for homeowners ins and I have documentation that it’s taken care of. I just don’t think the risk that it won’t be taken care of it is worth it.

  5. I wonder how difficult it is to cancel Escrow with your mortgage co. I am just thinking about how I could divert the same amount of money each month to an ING Savings account titled “Escrow” and use that to pay my insurance and taxes when due. Plus I’d earn a little interest, and I’d be more directly in “tune” with how much my insurance and taxes cost me each year.

  6. “Even if you’re upset and angry with the situation, remember that it’s not the fault of the person you’re talking to.”

    Something most people forget, and never understand. It really sucks being on the front lines in a customer service position.

    All the screaming and whining only makes things harder when we can’t understand any coherent thought in your rant, and ask over and over again, “So, what exactly is the reason you’re calling in for?”

  7. Keep in mind that with some loans (FHA and VA loans), you are required by law to have an escrow account. With conventional loans, there’s usually a minimum equity requirement before the mortgage company will let you pay your own taxes and insurance – usually 20%.

    Also, some states have a requirement that the mortgage company pay interest on your escrow balance. Here in Maryland, my mortgage company pays me 3% interest on my escrow balance – far better than I could get with any savings account. So the escrow account is great in that case.

  8. As an insurance agent who deals with mortgage companies all the time for my clients, my only advice is… DO NOT escrow. I see far to often mortgage companies not paying bills, ‘never’ receiving the bill requests. Also, it’s time consuming if a client wants to move insurance companies mid-term, which many do. You don’t have to wait until renewal to review your insurance needs. Your needs are always changing!
    As #4 Sandy says, put it away in a savings account yourself and earn a dollar or two.

  9. Our mortgage is from a local credit union that holds and services 99% of the loans they originate, and I’m actually happy with how they handle escrow accounts. They always pay property taxes right on time to get me my 4% annual discount from the county. And in the land of 30% annual homeowner’s insurance rate increases for several years running after the 2004 storms, they let us run an actual negative balance on the account for several months running when they’d underestimated homeowner’s policy costs for the following year and it took a little time for us to accumulate enough back in the account to cover the policy premium.

    They figure since it’s their error in estimating costs, they’re willing to float us a 0% short term loan when that happens.

  10. We have never trusted escrow for regular house insurance.

    A similar thing happened to me with our cabel tv bill – I set it up as an automatic bank debit (before the days of paying electronically). For some reason one month the debit request failed (with no change in bank accounts or ISF, etc), which means the debit request was cancelled. I received several “live” bills but I, too, had gotten in the habit of not opening mail from them. Until I got a red-edged envelope containing the cancellation notice. I paid directly myself until the cable company began offering account management electronically. Now the payment is still automatic but I get confirmation from them as well as being able to check my bank account online to verify.

  11. Jill (#12): those are positive aspects of having an escrow account, but all mortgage companies are required by law to pay taxes at the discounted rate when they escrow for taxes – if they pay late, they have to pay the penalty from their own funds. And I’ve never heard of one charging interest on a negative escrow balance (they’re not allowed to charge interest on a shortage).

  12. Nearly 20 years and I’ve never had a problem with my escrow account. In fact, tax and insurance payments will become my responsibility soon and I’ll miss the automation escrow affords me.

  13. I’m another one who opens all mail (except the envelopes that say “This is not junk mail” from a new company that has “This is not [whatever it really is]” all over my city and which I already vehemently hate). It just a takes a few minutes to read the first paragraph and glance through the rest of the contents. And, if something is changing, check whether the things you care about are the things that are changing and, if so, whether you have any options. The good thing is that by law, companies have to notify you when they’re about to screw you in various ways. All we have to do is actually look at it.

    Also, you have to find all the checks and applications so you can shred them.

    @sandycheeks et al., my mortgage company won’t let me handle my own insurance and tax payments. (Yet another reason to pay the mortgage down ASAP.) Note: I do not have a VA or FHA loan and I have over 80% equity. Fortunately, my mortgage company has been keeping up perfectly except right at the beginning when I suddenly got notice that they had an added extra wind protection plan. I still remembered that my regular insurance had wind protection, so I called my insurance company to confirm that, they called my mortgage company, and the additional wind protection policy was removed.

  14. This sounds like it was more of glitch than anything HOWEVER it could have been far worse. Not long ago I met a woman who had had a fire in her home. Much of the home was destroyed. When they went to file an insurance claim they found that the mortgage company had not payed the premiums on the Homeowner’s insurance. Suing the mortgage company is an option but will be very costly and may not prove to be beneficial in the long run. And I do mean LONG run. But in the meantime they’ve had to try to figure out how to live, where to live, and how to pay for all the repairs to their home. What a nightmare. Her advice was to doublecheck your insurance policies at least annually. The voice of experience.

  15. Know what I do for a living? Mortgage tracking – ensuring that a client’s insurance policy records are up to date and in compliance with our requirements. I process “cancellation for non-payment” documents all the time. It happens most often when a loan is transferred to a different servicing company and the new address, loan number, etc is not passed along.

    I can only echo what Trent said about being proactive, because although the mortgage holder is “supposed” to handle these things for you, like the old saying goes if you want something done, do it yourself. I wouldn’t dare put my house at risk over something like that.

  16. A cautionary tale from another viewpoint.

    We switched our home and business insurance to
    a new agent and company which offered better
    rates and more local attention. All was well
    the first year. The second year the agent
    contacted us and asked for the payment which
    I tendered. Several months went by and then
    I got that cancellation warning like Trent did.
    The agent had never turned over the payment to
    the company. I called the company and explained
    that my check had been cashed and THEIR agent
    had responsibility for locating the funds.
    The agent doesn’t work for them any longer
    but I have insurance and am still their customer.

    I now know that if I am asked to write a check
    to the local agency, I need to check with the
    underwriting company after a short time to be
    sure the funds ended up where they should be.

    Maybe when Trent has time he might wish to write
    an entry on what agency means and what an agent
    is. It is pretty important to understand that
    if you interact with an agent and may be more
    important if you present yourself to anyone as
    acting as an agent.

  17. All of this sounds too complicated. My homeowner insurance is with my bank – or well, their insurance company, which is part of the same group — so whenever it’s time to renew it (I pay it yearly) they notify me well in advance (2 months, and then again 1 month before due date) by snail mail, and then they debit the amount from my bank account — the same associated with my mortgage. I see it clearly in my bank statements.

    Even if I were dealing with another insurance company (separate from the bank) the same procedure would follow.

    In which concerns property taxes: I get a letter from the IRS with the bill, and then I pay it however I want (check, wire transfer, etc).

    Taking care of all this stuff yourself isn’t that hard, as long as you pay attention and automate as much as possible.

  18. It is for reasons like this that I think that automatizing one’s finance is preferable only to having no control at all. Other issues may involve a missed automatic transfer due to some system change resulting in cascading failure in everything that is linked to that account.

  19. This is a perfect example of why I have commented on here before about paying attention.

    It is the number one rule in personal finance. Pay attention. Before emergency funds, or debt reduction, or anything else.

    I see much advice about automation, about convienence, etc regarding bills, savings, investments, etc. This is the downside to automation. Things can get screwed up. And judging by the comments they get screwed up often.

    The answer is to simply have less accounts to keep track of. Less bills. But the accounts that you do have…track them. Pay attention to them.

    Escrow accounts are ripe for errors. Becasuse the amounts constantly change. Insurance premiums increase,as toproperty taxes. The escrow account is always being “adjusted”

    Same with autopay on any bill that fluctuates. CC bills, utilities, etc.

  20. I can’t picture a mortgage company being so negligent, as the insurance is protecting THEIR investment until I pay it off.

  21. I guess what I don’t understand is why Trent has an escrow account. Normally, if you put 20% down you don’t need one.
    Plus, many lenders require a full year’s payment in advance for both insurance and property taxes. I’m not comfortable with them hanging onto that much of my money…I’d rather pay it myself (and gain the interest earned)
    That being said, I also have my insurance automatically paid through bill pay every month. I can immmediately track the monthly payments online through my bank’s website.
    We also saved a huge amount by using the same insurance company for Homeowners, Auto, Life, Boat and Renter’s (for our college kid’s rental) And I make the notifications myself when the home loan is sold.

  22. Please tell me that your discarded mail ends up in the RECYCLE bin, not the trash–sometimes with a stop at the shredder!

    Take care of the earth, as well as your finances.

  23. Escrows used to be the reliable way to pay taxes and insurance, but that was when the bank AND the insurance company had both been around for 100 years. Not any more. Any time you receive notice that a new bank or a new insurance company is taking over your account, you should plan on spending a couple of hours straightening out their mess and watching them like a hawk until they get it sorted out.

    In my experience, if you can avoid an escrow and are even semi-responsible at tracking and paying your bills, you’d be wise to do so.

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