Sometimes we may need to rewrite a policy at renewal or even in the middle of the policy period. If the customer gets their premium paid by the lender, the invoicing can be a bit confusing. What happens if the lender has already paid for the previous insurance before it was rewritten? What happens if you receive a refund from the previous insurance company for the proportionate amount?
Refunds are sent to the customer, not the lender. Why is this? It's actually your money, not the lender's money. The insurance company will send it to you to simplify the process. What you do with the money is up to you.
We recommend that you add the refund amount to your next payment to your mortgage company, but be sure to notify the company that the extra amount will be applied to your deposit. If you do not return it to the lender, you will probably see an adjustment in your monthly mortgage as they will need to recalculate your lump sum, as they paid more for the insurance on an annual basis than they had originally estimated.
Also remember to notify your insurance company when you change home insurance. Yes, the lender will automatically receive a copy of the insurance page and invoice by mail, but if the customer is not notified of the change, they can often discard it because their notes show that the insurance has already been paid. [1