June 28, 2009
Term Life Insurance Alberta: What Is Used to Price Mortgage Insurance Premiums?
Three big factors determine how much you will pay for mortgage insurance protection. 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).
Whether it is mortgage life insurance (insurance to pay off your home in the event of your death) or mortgage disability insurance (insurance that will pay your mortgage if you are unable to work because of a disabling illness or accident we are talking about, the factors that determine the premium are the same.
Since the age and condition of the insured is one of the most important determinants of when a policy will be paid, they are the most important determinant of how much it will cost. 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, since 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. Smokers, especially have to be careful of risking that ever present question: “How will the company know?” The answer is, they will know; if you suffer a debilitating heart attack, the cause can almost always be found, and you will have paid all those premiums and still left your family unprotected.
There are two typical policies, regular, which includes smokers and non smokers, which does not (and also includes those who have not smoked over the last 12 months.) The smoker’s policy is of course bound to be more expensive than the non smoker’s.
Keep in mind that insurance policies that are available without a physical have already priced the additional risks into the premium. Anyone who has exceptional health should consider getting a physical screening, since the premiums will be much lower.
Age and health are such important components of the calculations that a 50 year old with 18 years left on his $210,000 mortgage will pay more than twice as much as a 38 year old using the same conditions. Lowering the mortgage amount insured will not change the premium a great deal. It is not surprising since, in addition to the risks of age and health, the chances of the premium being paid longer are much better.
The amount of the mortgage willhave an impact on the cost of the policy. But up to around $250,000, the savings are small per each $10,000 lower value. Larger mortgages command a higher premium and the insurance company will also insist on an assessment to prove the value of the property.
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