Nothing focuses the mind as much as how much you are worth than purchasing a house. Suddenly your assets have increased by 50, 100 ,200%! This type of responsibility leads people to consider protecting this asset in case of their death with mortgage life insurance.
That is fine if you pass on, but the more likely occurrence is that you will be disabled, and neither you nor your loved ones will be able to stay in your home since you cannot work.
If you want to set up a disability insurance program, you should consult an insurance expert. Normally a professional such as this will review your needs and do an analysis of your income and your mortgage and home related expenses such as property taxes, hazard insurance and maintenance as well as your other finances to learn out what would best fit your needs.
Even if you already have disability insurance from a government program or from your place of employment, this is normally based on a “maximum qualifying” debt to income ratio of 36 to 50. This means that all of your debt, not just your home related debt, should be calculated. You may have a car loan, credit cards and other fixed expenses that you have to continue to pay. Your disability insurance will be unlikely to cover all of those costs and your mortgage expenses as well.
There are a number of features to be conscious of when shopping for mortgage disability insurance for instance the benefit period, the elimination period and the riders.
The simplest feature is the benefit period, which means how long you will be able to collect benefits. This is usually through 65 years of age, but if you can shorten that period, you can save a lot in premiums. If there are circumstances that may allow you to shorten the benefit period, such as social security benefits of a spouse, or starting penalty free withdrawals from a retirement plan at 59 , for example, you may consider this savings mechanism.
The next area of interest is the elimination period, how long your disability must exist before you can receive a benefit. Extending this period is one way to lower premiums. If you are in the habit of saving for emergencies, this fund may carry you over for a length of time before a longer term benefit is needed.
A rider is an additional coverage that you may choose to add onto your policy. A common rider is a cost of living rider, this will increase the benefit according to recognized cost of living increases.
understanding all of these options can be difficult, but it is important to be aware of what exists. This will permit you to ask the right questions and get the right policy.