Mortgage insurance products are fairly straight forward. Mortgage life insurance pays off your mortgage if you pass on. You can choose decreasing or fixed term, depending on the kind of mortgage you have. Disability mortgage insurance means the payment of the monthly bill during a period of disability when there is no salary.
Once the kind of insurance is decided upon, the homeowner has to decide regarding optional products.
For example, a mortgage disability policy can be one with partial disability benefits and the beneficiary is paid a certain amount during the defined period of the disability or it can be with residual benefits where the beneficiary is paid benefits in proportion to his loss of income.
You may have the choice between short term disability insurance where the policy will be for a maximum term of, for example two years. If you have retirement funds and planned on early retirement, you may not need to have disability insurance to cover your mortgage when you start that income stream.
In addition to choosing a policy, the buyer will have to choose between the choice of riders available. They are: guaranteed renewable policy, non cancelable policy, guaranteed future insurability, inflation protection and waiver of premium.
Inflation Protection
An inflation protection rider will periodically increase the benefit dollar based ona cost of living index. This protects against the disability payments falling way short of the required payments in the future.
Guaranteed Future Insurability
If the value of the property grows, whether through normal appreciation or due to improvements, the value of the protection can grow with it, without any requirement for a new application.
Guaranteed Renewable Policy
As long as premiums continue to be paid, the policy will be renewable, although premiums may be raised to maintain the same coverage.
Non-Cancelable Policy
With the purchase of this rider, the policy is renewable, and it is shielded from increased premiums.
Waiver of Premium
Once you start receiving a benefit, the premiums are no longer payable if you have this rider. This means that when you are disabled, you do not have to continue paying the premiums on your mortgage disability policy.
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