(MONEY Magazine) – If you make a down payment of less than 20% when you finance a home--as about half this year's estimated 4.7 million home buyers will--the lender will probably demand that you buy a mortgage insurance policy. This coverage--which typically runs $45 or more a month--protects the lender in the event you default on your loan.

Fair enough. But while borrowers should be free to get rid of these policies once they have a 20% equity stake in their home, consumer advocates contend that many policyholders wind up paying for this insurance for three or more years longer. Some disgruntled borrowers are fighting back. In June, as part of a settlement of a class-action suit, $97.1 billion Banc One in Columbus, Ohio agreed to cancel the policies of about 9,000 borrowers and refund some $1.4 million of the premiums they had paid.

The reason so many borrowers get saddled so long with this insurance is simple. Even though guidelines set by Fannie Mae and other firms that invest in mortgages often require lenders to let you drop the coverage if you meet the criteria, lenders don't make much of an effort to disclose this policy to you. Rep. James Hansen (R-Utah) introduced a bill in Congress in June that would require better disclosure and guarantee borrowers the right to unload this insurance once they have a 20% equity reserve in their home. But even if this bill becomes law, you would still have to figure out when your equity has hit that level--and then ask the lender to jettison the coverage. "Most lenders are not going to come to you," says Edward Mrkvicka, author of Your Bank Is Ripping You Off (St. Martin's, $12.95), which will be published in January.

To avoid paying for coverage you don't need, follow these three tips:

--Ask your lender what criteria you must meet to drop the insurance. Some banks, for example, stipulate that you must keep the policy for two to five years regardless of how much equity you've built up.

--Keep track of your home's market value. If the value of the $100,000 home that you financed with a $90,000 loan rises 4% annually, appreciation alone will give you a 20% equity stake within four years. Most lenders require a certified appraisal to document your home's value. Cost: $250 to $400.

--Monitor your mortgage balance. Even without the aid of rising home prices, someone who financed a $100,000 house with a 15% down payment and an 8% 30-year mortgage would reduce the balance of the loan through regular monthly payments to less than $80,000--the equivalent of a 20% down payment--in almost six years.

If you feel your lender is stalling, call your state banking commissioner. That move alone may help the lender see things your way.

--Judy Feldman