Mortgage Disability Insurance

When you get hurt, injured or become diagnosed with a serious illness, you may face the unfortunate fact of being either temporarily or permanently out of work. It’s a hard realization to accept. Many people wonder how to pay their bills, including their mortgage. This is where mortgage disability insurance becomes beneficial.

A mortgage disability insurance policy makes it easier for you to recover, persevere and thrive after becoming disabled. It is a safety net providing additional coverage to ensure you keep your home even when you can no longer return to work.

What is Mortgage Disability Insurance?

Mortgage disability insurance is a policy you purchase voluntarily. It is a standalone policy that pays for your mortgage when you become injured, ill or disabled. The insurance company will use the current amount of your mortgage, your health status, age and your occupation to determine the amount of your premium.

Unlike a mortgage insurance policy that you typically purchase while closing the purchase of your home and signing paperwork for your mortgage, when you purchase a mortgage disability insurance policy, your lender will not be involved in any way. You will not receive any reminders that you need to purchase this type of policy or receive recommendations from your lender. Therefore, you need to conduct your own research to know exactly what you are looking for when taking out a mortgage disability policy.

There are several options out there for you to choose from, and you can set up a policy to start at the time of closing when you purchase your home. Doing so will further guarantee you are never without coverage. With illness and injury being so unpredictable, this is the optimal way to ensure you will always be able to pay your mortgage and keep your home protected no matter what the future holds.

As with all other insurance products, the cost for your mortgage disability insurance premium will vary from what everyone else pays. This form of coverage is often more affordable than traditional long-term disability insurance, but that is because the benefits are so limited. The best way to offset the high cost of mortgage disability insurance and any other form of coverage is to compare rates from different providers and choose the one that gives you the best premium for your budget along with the most practical benefits.

What Happens When You Are Disabled?

When you are injured in an accident that leaves you temporarily or permanently disabled, you are left with feelings of doubt and uncertainty as you wonder how you will pay your bills and survive in general. As you rethink your family’s budget and consider what debts you can cut out, there is one expenditure you cannot avoid and that is your mortgage.

If you become disabled because of an accident where someone else was at fault, you may receive compensation from a lawsuit that will help you take care of most of your debt. But many times, even after winning a case, people still need additional assistance with paying their most important debts.

Mortgage disability insurance can provide policyholders with a monthly income amount. This amount covers their mortgage principal and interest payments whenever the owner of the policy becomes disabled and is no longer able to return to work. It’s an ideal solution for those working in high-risk occupations who have a greater risk of injury while on the job, such as those in the roofing industry or construction business.

With the right mortgage disability insurance plan, you can reduce your risk of losing your home if you can no longer work for an extended period or permanently. Coverage is typically offered without a medical exam. The policy payouts are usually tax-free as long as the policyholder doesn’t deduct the monthly premium when taxes get filed each year.

An accident, injury or severe diagnosis can occur when you least expect it. Even the healthiest people who strive to take care of their overall wellbeing can end up disabled because of a car crash or a severe fall. Therefore, it is best to be prepared for the worst when it comes to protecting an investment as substantial as your home.

Does Mortgage Insurance Cover Disabilities?

Because mortgage disability insurance is linked to the mortgage on your home, it is different from traditional disability insurance policies that pay you a percentage of your salary after you are injured. It is also different from a mortgage life insurance policy that offers your beneficiaries a death benefit if you pass away before your home’s mortgage is paid off. 

The primary mortgage insurance policy you took out when you first signed up for a mortgage is different because it protects the lender. The money you pay monthly on mortgage insurance will protect the lender from losing money if you cannot pay your mortgage for whatever reason. Unfortunately, it is not designed to protect you.

Another way your regular mortgage insurance policy is different from mortgage disability insurance is how payments are issued. With traditional mortgage insurance, the payments are issued directly to your lender when you can no longer make your mortgage payments on your own. However, with mortgage disability insurance, as well as long-term disability coverage, the payment goes directly to you so that you can make your mortgage payment to the lender on your own.

Mortgage disability insurance will help you pay for your mortgage principal and interest payments, thus allowing you to keep your home. While it will not provide you with additional income to take care of your everyday expenses like a long-term disability insurance policy, it will provide you with many more benefits than your basic mortgage insurance coverage. Therefore, it is best to look at all your options regarding insuring your mortgage and taking steps to provide you with the most benefits if the worst-case scenario happens.

Best Mortgage Disability Life Insurance Providers

Protect Your Mortgage from Income Loss

Mortgage disability insurance is not as widely discussed as traditional mortgage insurance or long-term disability insurance coverage. So, it is common for homeowners to be unaware that these policies even exist. But fortunately, they are out there and available for you to purchase to ensure your investment is protected.

If you are interested in learning more about the many benefits of a mortgage disability insurance policy and how you can become a policyholder, be sure to check back with Benzinga often for insight into financial tips and tricks to help you thrive — even during the most challenging times.

Frequently Asked Questions