Family Finance Help

How much you pay for your mortgage insurance premiums will hinge largely on three things. For any given policy with similar features, the premiums will be fixed by the size of the mortgage, the age of the homeowner and whether or not he is a smoker.

Both mortgage life (to guarantee payment of the mortgage at the death of the insured) and disability (to provide income for paying the mortgage in case of the disability of the insured) use the same criteria to price the premiums.

The age and health of the insured is of the utmost importance to the insurance company, since that will determine for its actuaries what the chances of paying out are. There are policies that do not require that the health of the insured be certified by an examination. This can be chancy, since any statement that would infer good physical can be used negatively if the claim is processed and it turns out a health condition (or smoking) was hidden. Many smokers think they can hide this fact and keep the premium lower, and assume the insurance companies won’t know. The answer is, they will know; if you have a debilitating heart attack, the cause can almost always be found, and you will have paid all that money and still left your family unprotected.

Recognizing this limitation, many companies now offer Regular (for smokers) and Non-tobacco, which is for applicants who do not now use tobacco or have not used it within the prior twelve months period. Of course, a smoker’s risk is already priced into that policy.

Needless to say, if a policy is going to cover someone without looking to his physical health, there is a built in premium increase for that. So those who are in very good health should think about taking the physical to see if lower premiums are available for him.

Age is a big piece of the way premiums are priced, and if you compared a quote for a 38 year old, same size loan, same length left on the mortgage, it would be less than half that of a 50 year old. Reducing the principal on the mortgage changes the premium by mere dollars, so it is easy to see that the actuarial tables are what drives this pricing. None of this is surprising, because the insurance business is based on increasing the collection of premiums and putting off paying of policies.

The mortgage amount has an affect at a given level, however. Up to about $250,000, the amount covered will not change the premium a great deal and will probably fall within the quick quote easy application classes. But once the value of the property insured starts to go up, the insurer will require a complete application and an individualized quote, and of course, the property itself will have to be assessed.