When Is Mortgage Disability Insurance Sensible?

Mortgage disability insurance is a sensible purchase when you buy your home in cases where your family cannot contribute to the mortgage payments in the event of your death or illness.

How It Works

In the event you become disabled or in the event of your death outside of the workplace, your mortgage disability insurance will protect you and/or your family from losing your home by covering your monthly mortgage payments.

In most cases, your mortgage disability insurance will begin to pay out benefits one month after you become disabled or unemployed, and the policy usually pays for no more than 12 months. The policy may also make payments directly to your lender.

A mortgage disability insurance policy can be purchased through your lender or by contacting your local insurance agent.

What You Need to Understand about the Policy

Some lenders may require you to purchase mortgage disability insurance before approving you for your loan, although it is not usually obligatory. Do not feel pressured by your mortgage company to purchase this insurance from them. It is best to shop around for the best policy and be certain to choose a policy that will cover all of your mortgage bills. This includes any interest and repayments.

Before purchasing a policy, be certain to read all terms and conditions in the fine print, and understand them.

As mortgage disability insurance is a specialized form of term insurance, you should know that as your mortgage balance decreases, your insurance coverage would also decrease.

Why It Is Important

If your mortgage payment is a little outside of your comfort zone or you have no other form of disability protection, even through your place of employment, it is a wise choice to purchase a mortgage disability insurance policy. Solely depending on your savings in the event of a disability is not a good idea when you do not know how long you may be disabled. Your funds could run out before you are able to return to work if the amount of time exceeds your savings to cover your mortgage payments.

If you do have disability insurance through your place of employment, it may be enough to cover what you need, as purchasing additional coverage will not give you more money. Some mortgage disability policies may have a clause that restrict the amount of money you can receive and may only give you benefits if your work disability pays you less than 50% of your salary.

The best option is to be certain you are protected all around and will be able to provide for your family in some form by considering a mortgage disability policy or looking into disability insurance through your place of employment.

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