Refund for Landlord’s Insurance after 1 month because I’m doing a lease back. Can someone help clarify my solution?

I'm closing on a house on June 29th. The family wishes to stay in the house until I gain possession on July 31st, and will pay me rent for that month.

I was advised to obtain Landlord's Insurance. I obtained a quote, but the insurance company said I must pay for a full year of Landlord's Insurance as I cannot obtain coverage for a single month.

He said that once that month is up, I will call him and he will cancel my Landlord's Policy and write up a new policy for Homeowner's Insurance.

The part that confuses is me is regarding getting my refund for the 11 months that I will be living in the house. He said that he cannot issue me a Refund Check directly. After the month, he will process a Refund for the time not covered and this refund will be sent to my escrow. Apparently I have to warn my bank about this, because I am not allowed to touch this money?

Can someone explain why this has to be? Why can't I just get a check back, and then put that towards the Homeowner's Insurance? Why must it go into my escrow account on the home?

Thank you.

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