Frequently Asked Questions about Mortgage Life Insurance:
- What is mortgage life insurance?
When obtaining a mortgage from a bank, one of the bank’s requirements is to purchase a mortgage life insurance policy. In the unfortunate event of the borrower’s death, the insurance policy ensures that the outstanding mortgage amount is paid to the bank at that specific point in time. This way, the bank safeguards itself from the risk.
- Is mortgage life insurance mandatory?
No, although in most cases, banks do require mortgage insurance.
- How is the insurance amount determined?
The insurance amount is equal to the outstanding mortgage debt at a given moment. The policy price changes every month and is derived from two main variables: the age of the insured (which increases over time, affecting the premium) and the decreasing mortgage amount, reducing the premium as the mortgage is paid off monthly.
- What are the criteria for determining mortgage insurance rates?
Age, gender (male or female), smoking status, and the insurance amount. As the risk increases, so does the price.
- If my health condition changes over time, is there an obligation to report it to the insurance company? Does it affect the price?
No. Once the policy is purchased, there is no obligation to report health changes, and the insurance company cannot increase the premium or refuse coverage based on changes in health.
- Can I switch mortgage insurance over the years?
Yes, it is possible to cancel one policy and purchase another that may offer better terms.
- If offered a policy with a currently lower price, is there a reason not to cancel and purchase the cheaper policy?
If there is a significant negative change in health, it could result in a premium increase or even denial. If not, it’s essential to verify that the discount is not just short-term. It’s advised to compare the total amounts paid for both policies based on their respective “premium development” attachments to determine which one is genuinely more affordable over time.