Mortgage paid off? Ask for home insurance discount

August 30 2010 by Ellen Roseman

Home insurance companies offer discounts for a bunch of reasons. Here’s an article I found that mentions 15 ways to save, but omits one key fact.

If you own your home free and clear, you can save on home insurance. Canadian Capitalist noted this in a recent post.

Take If Shari, a reader who paid off his mortgage in 2004. He wanted his insurer to pay back all the foregone discounts.

We have been insuring our home and two cars with Aviva for many years, paying several thousands dollars each year.

Just yesterday, I have discovered that they allow a discount on home insurance if you are mortgage free. The amount is quite significant at $80 for just this year.

Aviva never notified us of the existence of such discount. If we had been aware, we would have definitely advised them earlier.

I told him that I doubted he would be reimbursed for six years, but he wanted me to try. So, I contacted the company complaints officer, whose number I found through the Financial Services Commission of Ontario.

Guess what? He got a positive response the same day.

Ellen, it worked! Someone called to say she will be giving me a refund of all the past years’ overpayment. Thanks to you! Ellen, you don’t know your own power!

Glenm Cooper, the media contact at Aviva, said my interest helped speed up the refund. But it would have come anyway because the customer had attached a letter from the bank, testifying to his mortgage-free status since 2004.

So, ask your insurer about mortgage-free discounts. I called mine (TD) and found it offered one, though this discount didn’t make the list at its website.

I’m still waiting to hear why the insurance companies think there’s less risk once the mortgage is paid off. Maybe readers can explain it.

News flash: I’m giving my evening course at University of Toronto, Investing for Beginners, starting Thursday, Sept. 16. Here’s a link for information and registration.

12 comments

  1. Jason

    Aug 31 2010

    What good is a discount with TD when their rates are one of the highest around?

    Even after a handful of discounts you’ll end up paying more than you would be paying with another company right off the bat, without even asking for any discounts.

    I wouldn’t recommend them for any type of insurance until they drop their rates to something more reasonable.

  2. bylo

    Aug 31 2010

    “I’m still waiting to hear why the insurance companies think there’s less risk once the mortgage is paid off.”

    My guess: If you own the property outright then you have a stronger incentive to take care of it and protect it than someone who owns only 5% or 10%. Of course by that logic the insurer should offer a sliding scale of discounts as your equity increases, however, that would be impractical to enforce. Also by this logic someone who’s “underwater” is more likely to commit arson, etc. to try to free themselves of their obligation.

    Another possible reason, not that I agree with it, is similar to why they use the insured’s credit rating to determine the premium.

  3. Canadian Capitalist

    Aug 31 2010

    Thanks for the mention Ellen. I’m guessing actuarial studies show mortgage-free home owners do not make as many claims as those with a mortgage. Just a guess though.

  4. Million Dollar Journey

    Aug 31 2010

    What if your are mortgage free but with a HELOC? Does the discount still apply?

  5. Canadian Capitalist

    Aug 31 2010

    @MDJ: The discount only applies to homes that are free of any liens. A secured line of credit is treated like a mortgage even if the balance is zero.

  6. Sas

    Sep 9 2010

    First of all, I’d like to thank Ellen and all for the info. My mortgage has been paid off. I called my insurance underwriter to inquire about the discount. The service agent at first refused to apply the current year’s discount.

    When I asked to discuss with his supervisor, he put me on hold for 20 minutes. Then he agreed to the current and future year discount of 10%, but declined to offer discounts for previous years. He did not request documents.

    I followed the link in this blog and called the ombudsman’s office. It took a message and passed on to the insurance. The same agent called back and again declined my request for the previous years’ discount (albeit in a rude telephone conversation).

  1. This and That: Q3 2010 Bank Earnings and more… | Canadian Capitalist
  2. A Lap Of The Blogs | WhereDoesAllMyMoneyGo.com
  3. Best and Worst Personal Finance Articles » Plan B Economics
  4. This and That: Q3 2010 Bank Earnings and more… | MoneySense
  5. How to save money on home, auto insurance | Save with SPP