Mortgage Insurance In BC: What Is Used to Price Mortgage Insurance Premiums?
You can be sure of three main factors affecting the cost of your mortgage insurance. For any given policy with similar features, the premiums will be determined by the size of the mortgage, the age of the homeowner and whether or not he is a 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 fix the premium are the same.
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 off the insurance are. There are policies that do not require that the health of the insured be certified by an examination. Just because a physical is not required, don’t think you can hide a serious health condition or whether you are a smoker. Don’t think you can claim that you are a non smoker and then collect on the policy because the insurance company didn’t realize. They will know, and if you have made false statements on the application, you may jeopardize the entire insurance.
The two types of policies on offer are regular, which includes smokers and non smokers, which of course, does not include smokers. Of course, a smoker’s risk is already priced into that policy.
Bear in mind that insurance policies that are writable 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 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 loan, it would be less than half that of a 50 year old. Even a much lower mortgage will not have that great an affect on the net premium for the policy. That age has the biggest impact should not be surprising; the insurance increases its collection period and decreases its payout period.
The mortgage amount has an affect at a given level, however. Prior to the $250,000 threshold, however, there is not a big impact on prices. But once the value of the property insured starts to go up, the insurer will require a full application and an individualized quote, and of course, the property itself will have to be assessed.