There are not a lot of varieties when we talk about mortgage insurance products. One product is mortgage life insurance, which guarantees that your mortgage will be paid if you die. This can be either decreasing term or fixed term, it depends on the nature of your mortgage. The other kind of mortgage insurance is disability that will continue to pay your monthly mortgage when you become disabled.
Once the kind of insurance is decided upon, the homeowner has to decide regarding optional products.
First make sure you understand whether you have picked a partial disability policy, with a predefined amount or a residual policy, that has an amount based on current salary.
A home owner could also choose a short term disability benefit in which the policy would only pay benefits for a shorter, specified length of time, such as 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 picking a policy, the buyer will have to choose between the choice of riders available. These may be inflation protection, guaranteed future insurability, guaranteed renewable policy, non cancelable policy or waiver of premium.
Inflation Protection
Purchasing this rider will mean that your benefit will go up as inflation rises. A rider like as this prevents your disability payment from being too little should inflation pick up.
Guaranteed Future Insurability
A rider such as this will let the policy holder increase the face of the policy if the value of the house grows, without having to reapply for the mortgage insurance.
Guaranteed Renewable Policy
You will always have the right to renew the insurance, however the insurer reserves the right to increase premiums.
Non-Cancelable Policy
This rider renews the policy and also protects the premium from increase.
Waiver of Premium
Another popular rider is one that that allows for the premiums on the insurance to be waived when benefits begin. This is to prevent any additional expenses during the length of your disability.