Does Escrow Include Home Insurance? 
The term ` Escrow ' has a double meaning . Escrow is utilized mainly in the Western States as the legal process of closing the purchase or refinancing transaction of real property ; Escrow Companies exist to facilitate the purchase , sale & refinancing of real property transactions . In States where Escrow Companies are not used , Mortgage and Title Companies utilize ` Closing Professionals ' to facilitate the same process . During the Escrow/Closing process , if a mortgage is involved , it is customary for the mortgage lender to require that all taxes are current and property insurance is paid in full for the first year . Escrow companies will be charged with the fiduciary responsibility to assure the mortgage company upon funding that both conditions have been met and proven . The term Escrow is also used synonymously with a Mortgage Impound Account which is simply a savings account setup for the purpose of saving funds in preparation of making payments to renew property insurance and property taxes ; a mortgage company or bank will simply calculate the necessary amount to be deposited into the Escrow/Impound account monthly in order for a shortage not to exist when future property tax and future property insurance invoices are presented . The monthly calculation usually involves the addition of the annual property tax and the annual property insurance , a 10 % safety buffer is added , then the total is divided by 12 . The account is an interest bearing account and an annual assessment summary is sent to the mortgage holder at the end of each year . There is usually no charge associated with having this account ; it is simply to facilitate payments without the burden of a large obligation at one time for the mortgage holder . It is important for homeowners to understand the escrow and/or impound process as there seems to be many misconceptions of how the process works . It is a very simple process but the most confusing to the ley person is the fact that he/she is actually depositing a monthly savings amount into an account which will pay future invoices presented . Property Taxes are generally invoiced twice a year and Homeowners Insurance is generally invoiced once a year ; money is saved on a monthly basis in order for the funds to be present when the invoices arrive . For a further and/or more detailed explanation , you may wish to contact your Real Estate , Mortgage and or Escrow/Closing Professional directly . 