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Mortgage Disability Insurance |
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There are some insurance companies that offer mortgage disability insurance type policies. These mortgage disability insurance policies are designed to provide a benefit equal to the monthly mortgage payment. While both life and disability insurance on mortgage payments (in the event of death, the policy is intended to pay off the mortgage) are certainly a good idea, we believe that there are two fundamental issues with mortgage disability insurance plans.
The first issue (for mortgage disability insurance - not life insurance) is the possibility of not being able to collect benefits from the mortgage disability insurance policy because the disability may affect or even severely reduce one's ability to earn an income but not be severe enough to trigger a benefit. Once again, we are subject to the definitions of disability. One possible red flag for mortgage disability insurance is the premium. If the premium for mortgage disability insurance seems very low compared to other individual disability income insurance policies, chances are that the definitions are restrictive and you would have to be flat on your back and unable to do anything to collect a benefit. Most disabilities do not manifest themselves in this fashion. Keep in mind that mortgage disability insurance, like all other disability insurance plans, is priced based upon expected claims. If the premium is too low, it is highly indicative that the insurance company issuing the mortgage disability insurance expects a low claims experience, and a considerable part of this expectation is from restrictive definitions. One solution for anyone that wants mortgage disability insurance is to purchase a better plan, such as ProVider Plus, in an amount that covers the mortgage. Using this approach as a substitute for mortgage disability insurance, you could have far better definitions and be able to receive benefits for many disabilities that may not be covered under mortgage disability insurance. While this may cost more than mortgage disability insurance, it can easily pay for itself many times over if you ever need it.
The second issue is that while it is better to have the mortgage disability insurance than nothing at all if you are disabled, what about all of the other bills? Car payments, food, clothing, utilities, credit cards and other periodic expenses will still continue. If your mortgage consists of 20%-40% or so of the monthly budget, where will the rest of the money come from? Life and disability insurance on mortgage payments or mortgage payoffs only is like having half of a parachute. Without a policy to pay the rest of the bills, it can still mean financial disaster.
If you research the Internet for mortgage disability insurance, some popular search terms are:
- mortgage disability insurance
- life and disability insurance on mortgage
- disability insurance mortgage unemployment
If you have questions or would like us to help you review and compare definitions of mortgage disability insurance to ProVider Plus or other individual disability insurance policies we offer, contact us
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Policy Forms 0100, 1100 and 2100 are underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly-owned stock subsidiary of The Guardian Life Insurance Company of America ("Guardian"), New York, NY. Policy Forms NC111 and NC112 in CA are provided by Guardian. Product provisions and features may vary by state. |
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