Mortgage insurance products are usually straight forward. One product is mortgage life insurance, which means that your mortgage will be paid if you die. This can be either decreasing term or fixed term, depending on the kind of mortgage you have. The other type of mortgage insurance is disability that will keep paying your monthly mortgage when you become disabled.
Once the kind of policy is decided upon, the homeowner has to decide regarding optional products.
In discussing a mortgage liability insurance policy, be sure you understand whether your broker is discussing a partial disability policy where you get a predefined amount during the disability term, or a residual policy where you get a percentage of your income.
You may have a choice between short term disability insurance in which the policy will cover a maximum term of, for example two years. This is usually the kind for a homeowner who has another policy that would cover his expenses in at a later age.
Besides the types of insurance a homeowner can choose, there are number of optional features, or riders, that can be written onto a policy. These may be inflation protection, guaranteed future insurability, guaranteed renewable policy, non cancelable policy and waiver of premium.
Inflation Protection
An inflation protection rider will automatically increase the benefit amount 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 because of improvements, the value of the protection can grow with it, without any requirement for a new application.
Guaranteed Renewable Policy
This rider assures that the policy will always be renewable (as long as premiums are current, though they may be increased.)
Non-Cancelable Policy
This rider will renew the policy and also protects the premium from going up.
Waiver of Premium
Another popular rider is a feature that allows for the premiums on the insurance to be waived upon receiving benefits. It would be an added financial burden to have to continue to pay the premiums on the insurance after you have become disabled.
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