Mortgage Premiummortage premium
Unlike mortgage credit guarantee policies, which are designed to shield the creditor from the borrower's exposure to credit loss, this is not the case. At the beginning of the term of the insurance, the value of the cover must correspond to the principal amount of the mortgage to be repaid and the date of cancellation of the contract must be the same as the date set for the date of ultimate instalment of the mortgage to be repaid.
In this case, the insurer will calculate the annuity at which the cover is to be reduced in order to reflect the value of the principal on the redemption mortgage. Although the customer is in arrears with the refund, the policy usually keeps to its initial timetable and does not keep pace with the receivable.
Certain mortgage annuities also cover the cost of diagnosing an incurable disease in the insured's home that the insured is likely to contract within 12 month of his or her death. Insurers sometimes incorporate other characteristics into their mortgage lifetime assurance policy to mirror the terms of their country's home markets and their national taxation rules.
On the basis of the mechanical nature of the products, mortgage credit insurances are finance products that, ironically, lose value as the customer buyer gives more premium to the underwriter. Often, conventional assurance (fixed-term or open-ended) can provide a better degree of cover for significantly lower premium levels. Compared to mortgage endowment policies, the main benefit of conventional endowment policies is that the former retains their nominal value throughout the duration of the policies, while the latter promise to repay an amount corresponding to the customer's mortgage liability at all times, which is by nature a declining amount.
Therefore, mortgage credit assurance is highly lucrative for creditors and/or underwriters, and unfavourable for creditors as well. After all, mortgage endowment policy is not prescribed by statute. The decision as to whether or not to choose an insurer for the protection of the customer's assets lies with the customer lender.
These sub-optimal characteristics of mortgage health cover have caused the franchise to be sharply criticized by finance professionals and the news media across North America for over a decade. 1.5 billion people have been buying this policy for more than a year. In recent years, this has probably resulted in fewer active bank advertisements for this commodity, although many still hold it in their portfolio.
In many cases, however, where the risk policy is refused for medical reason, the mortgage policy is still available (this does not ensure that you are insured, but you may choose to continue paying the premium; the bank has the right to refuse the claim).
The reason for this is post-claim claims, i.e. they examine whether you are eligible for claims handling. As a result, the premium will be refunded and no covering will be provided)[citation required]. Being such, mortgage annuity policies can provide the largest cost allowance for a late breadwinner namely living expenses.
Hypothecary cover may be used in some context to describe mortgage credit protection products (PMI), also known as mortgage creditors. 3 ] Personal mortgage insurances protect the creditor instead of the debtor, even though his premium must be paid by the debtor. In certain legal systems, this kind of cover is mandatory for mortgage loans that start with low down payment.