If a buyer's loan payment will include a monthly reserve for hazard insurance, the escrow closing statement shows prepaid and impound insurance covering

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Multiple Choice

If a buyer's loan payment will include a monthly reserve for hazard insurance, the escrow closing statement shows prepaid and impound insurance covering

The concept at play is how hazard insurance is funded through an escrow: part of the premium is prepaid at closing for the portion of the current policy year that remains after closing, and the rest is set up in the escrow to be paid monthly over the coming year. If the loan requires a monthly reserve for hazard insurance, the closing statement will typically show a prepaid amount for the portion of the current policy year that remains, plus an impounded amount to cover the next 12 monthly premiums. When you add those together, you commonly have two months’ worth of premium prepaid plus 12 months in escrow, totaling fourteen months of hazard insurance coverage shown on the statement.

The concept at play is how hazard insurance is funded through an escrow: part of the premium is prepaid at closing for the portion of the current policy year that remains after closing, and the rest is set up in the escrow to be paid monthly over the coming year.

If the loan requires a monthly reserve for hazard insurance, the closing statement will typically show a prepaid amount for the portion of the current policy year that remains, plus an impounded amount to cover the next 12 monthly premiums. When you add those together, you commonly have two months’ worth of premium prepaid plus 12 months in escrow, totaling fourteen months of hazard insurance coverage shown on the statement.

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