There is a lot to think about when you buy a house. All of a sudden your assets have increased by 50, 100 ,200%! No wonder you are thinking about mortgage life insurance protect your home any way you are able to.
This protects your family if you are gone, but what protects you, what keeps you in the home if you are not able to pay your home loan in case you are disabled and unable to work and earn your normal salary?
If you want to set up a disability insurance program, you should consult an insurance broker. This professional will do a complete analysis of your income and housing needs; don’t forget that your home loan is only a part of the whole cost of living in your home.
Even if you already have disability insurance from a government program or from your place of work, this is usually based on a “maximum qualifying” debt to income ratio of 36 to 50. All your other debt has to be paid as well during the time you are disabled. Other consumer debt, such as your car or credit cards, as well as other insurance policies, all have to be paid. Your disability policy will be unlikely to cover all of those expenses and your mortgage expenses as well.
Make sure you understand the basics before you look for mortgage disability insurance, such as what the benefit period is, how long the elimination period is and what riders are available.
The benefit period is the how long the benefit will be paid out. In most policies, the benefit period extends to age 65, but if you are able to shorten it because you can count on some supplementary income before then, you can save a lot of money. If there are conditions that may allow you to shorten the benefit time, such as social security benefits of a spouse, or starting penalty free withdrawals from your retirement plan at 59 , for example, you may consider this savings mechanism.
The elimination period is the how long you must be disabled before can collect benefits. Again, if you can extend this waiting period, your premiums will be less. If you have saved for a rainy day, this may be the rainy day, and you can save a lot of premium expense if you have these funds to cover you for a while.
Many companies will offer certain riders that may be applicable in certain cases. A common rider is a cost of living rider, that will increase the payout according to recognized cost of living increases.
Viewing all of these options can be confusing, but it is important to be aware of what exists. This allows you to ask the best questions and get the best policy.
|
|