Family Finance Help

You can be sure of three main factors determining the premium of your mortgage insurance. If you compare a similar policy, you may receive different quotes, based on the size of the mortgage, and the condition of the owner (age, smoker or non smoker).

Both kinds of mortgage insurance-life to pay down the mortgage, or disability to continue mortgage payments-use these three things to calculate the premium.

As in most insurance policies, the health and age of the insured have the biggest impact since it determines the possible chance the policy will have to be paid. There are policies that will not require that the health of the insured be certified by an examination. It is very risky to claim good health without it, however, because the insurance company can deny any claim if it comes from a condition that they can prove to be known to you at the time the policy was written. Many smokers think they may be able hide this fact and keep the premium lower, and believe the insurance companies can’t know. They will know, and if you have made incorrect statements on the application, you may jeopardize the entire policy.

Recognizing this limitation, many companies now have 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 calculated into that policy.

It also has to be realized that any policy that does not have a health screening will have an automatic cost built in to cover additional risk. Anyone who has exceptional health should think about getting a physical examination, since the premiums will be much lower.

Age is a big factor in the way premiums are calculated, and if you compared a quote for a 38 year old, same mortgage, same length left on the loan, it would be less than half that of a 50 year old. Reducing the principal on the mortgage adjusts the premium by mere dollars, so it is easy to see that the actuarial tables are what drives this calculation. It is not surprising since, in addition to the risks of age and health, the chances of the premium being paid longer are much greater.

The amount of the mortgage doeshave an impact on the cost of the insurance. 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 home that is 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.