There are not a lot of varieties when we talk about mortgage insurance products. There is mortgage life insurance to guarantee that your mortgage will be paid on the event of your death. This can be either decreasing term or fixed term, it depends on the kind of mortgage you have. There is mortgage disability insurance, which is intended to guarantee that your mortgage payment will be made in case you are disabled and unable to work.
But in addition to these plain vanilla variety of mortgage insurance products, buyers have some choices about the full nature of their policy.
In discussing a mortgage liability insurance policy, be sure you understand 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.
Short term as well as long term disability exists and you may decide upon short term if you feel you have other income that will start at a certain point. If you have retirement funds and planned on early retirement, you may not have to have disability insurance to cover your home loan when you start that income stream.
Besides the kinds of insurance a homeowner can pick, there are number of optional features, or riders, that can be written onto a policy. They are: guaranteed renewable policy, non cancelable policy, guaranteed future insurability, inflation protection or waiver of premium.
Inflation Protection
With this rider, inflation is factored into the payout, so that your disability payments, for example, will go up as the cost of living goes up. This will protect your mortgage benefit from being inadequate for paying your future home loan payments.
Guaranteed Future Insurability
The value of your home may increase because market forces or improvements you have made, but if you purchase this rider, you will be guaranteed that you can increase the policy to cover it, without re-applying.
Guaranteed Renewable Policy
You will always possess the right to renew the policy, but the insurer reserves the right to increase premiums.
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 policy to be waived when benefits begin. It would be a difficult financial load to have to continue to pay the premiums on the policy after you have become disabled.
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