Mortgage insurance products can be fairly straight forward. There is mortgage life insurance to make sure that your mortgage will be paid in case of your death. You can choose decreasing or fixed term, depending on the kind of mortgage you have. There is mortgage disability insurance, which is intended to guarantee that your home loan payment will be made in case you are disabled and cannot work.
Once the kind of policy is decided upon, the homeowner has to make some choices regarding optional products.
In discussing a mortgage liability insurance policy, be sure you are clear on whether your broker is talking about a partial disability policy where you get a predefined amount during the disability period, 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 be for a maximum term of, for example 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 begin that income stream.
Besides the kinds of insurance a homeowner can choose, there are number of optional features, or riders, that can be written onto a policy. These include inflation protection, guaranteed future insurability, guaranteed renewable policy, non cancelable policy or waiver of premium.
Inflation Protection
An inflation protection rider will periodically increase the benefit dollar based ona cost of living index. This will protect your mortgage benefit from being inadequate for paying your future home loan payments.
Guaranteed Future Insurability
If the value of the property grows, whether through normal appreciation or due to improvements, the value of the policy can grow with it, without any requirement for a new application.
Guaranteed Renewable Policy
As long as premiums continue to be up to date, the insurance will be renewable, although premiums may be increased to maintain the same coverage.
Non-Cancelable Policy
This rider will renew the policy and also will protect the premium from increase.
Waiver of Premium
When have started collecting benefits under the policy, you will not have to continue to pay the premiums, if you choose this rider. This is to prevent any additional expenses during the length of your disability.
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