What is Mortgage Disability Insurance 

Mortgage disability insurance is a policy usually written by the lender when you purchase a home. From some viewpoints it is better to get a general disability policy from your own insurance agent. There are several reasons for this thought. First of all is that these policies are rarely used and collected so it is seen as another add-on money maker for the lender. The mortgage holder feels better and more secure in knowing that should they become disabled that the policy will cover their mortgage payments.

If you have your own separate disability insurance the payments would come to you and include replacement of your income and not just the mortgage payments. Your premiums may be somewhat higher for income recovery coverage than just mortgage payment coverage. You would be better off because you would have more money to pay your other bills besides just the mortgage in the event that you become disabled and cannot work. The lender policy would be paid to the lender and not to you. Under the lender policy you would not receive extra money for your other expenses.

Mortgage disability insurance is a good thing to have in any case. It can be better if lumped into your general income disability policy according to most experts. You should have disability coverage based on facts from HUD (Department of Housing and Urban Development) that indicate over half the foreclosures on homes are due to personal disability. When the income stops coming in for any reason you are in jeopardy of losing your home and other items. It is prudent to have insurance for many events and disability is one major event that could affect your income and ability to pay your bills.

When considering mortgage disability insurance coverage, be sure to look at all the restrictions and limitations. Some stop when you reach age 65. Other issues that will result in non-payment are certain pre-existing conditions and normal events like pregnancy or military related injuries. Some benefits are only for a certain period of time after which you are on your own again. Consider the benefits versus costs and who gets the payments and for what purposes when you look at obtaining or adding mortgage disability insurance from your lender. Some policies will not pay you on that policy if your problem is covered by insurance such as workman’s compensation.

When you are in the midst of making a home purchase and working out the details of your mortgage with your lender, watch for additions like mortgage protection insurance that may not be in your best interest. Compare prices and coverage and benefits between your personal insurance company and the lender coverage offered. You want the most for your money and having your own general disability insurance could be a better way to go to be able to meet all your financial needs when disabled.