Classic Real Estate

You can count on three main factors determining the premium of your mortgage insurance. For any given policy with similar features, the premiums will be determined by the size of the loan, the age of the homeowner and whether or not he is a smoker.

Both mortgage life (to assure 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.

As in most insurance policies, the physical condition and age of the insured have the most impact since it determines the possible chance the policy will have to be paid. Many mortgage life and disability policies do not need a physical, only a statement of health condition. 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. Don’t think you can claim that you are a non smoker and then collect on the insurance because the insurance company didn’t know. But if the cause of death or disability can be connected to the hidden condition, the policy can be voided, and the insured would have paid premiums for nothing.

There are two basic policies, regular, which includes smokers or non smokers, which does not (and also includes those who have not smoked over the last 12 months.) Needless to say, the increased risk is built into the different premiums.

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

These factors can have a great effect on premiums, and the premiums for a 50 year old, with the same amount of mortgage, will be more than twice as much as that of a 38 year old. Even a substantially lower mortgage will not have that great an affect on the net premium for the policy. It is not a surprise since, in addition to the risks of age and health, the risk of the premium being paid longer are much better.

The amount that will be insured is, of course the next main concern of the policy. Prior to the $250,000 threshold, though, there is not a great impact on prices. 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.