Mortgage
Protection & Disability Insurance “Q&A”
These are just a few
of the questions that many buyers often ask. Your
Mortgage
Protection Solutions Inc.
representative has the answers to all of your questions
so contact us today for more information!
Q. What is Mortgage Protection Life & Disability Insurance?
Mortgage Protection Life &
Disability Insurance is a life insurance program designed to pay off
a mortgage in the event of the premature death of the borrower or
co-borrower. These programs are considered to be supplemental in nature
as they are not intended to be the sole, stand-alone program to meet
an individual’s life insurance or disability insurance needs.
These programs are designed to pay off the balance of an individual’s
mortgage and are typically not “overwritten” to provide
funds at death over and above the balance of the mortgage to provide
for such expenses as funeral & burial costs, average annual living
expense costs for the surviving family, etc. These expenses should
be provided for through one’s individual life insurance program
where an individual’s annual income is used to establish the
death benefit. It is extremely common for an individual to have a
policy in force geared towards paying off their mortgage and an additional
policy in force designed to provide for their family’s annual
living expenses for a set period of time after their death. Should
an individual apply for the optional disability insurance rider available
through many Mortgage Life & Disability Insurance programs today,
the same guidelines apply as it pertains to the monthly benefit amount
provided by the rider. The monthly benefit provided by the optional
disability rider is designed to pay an individual’s monthly
mortgage payment including taxes and insurance for a period of up
to 2 full years. The benefit amount provided by the rider is not intended
to replace an individual’s monthly income from employment up
to their maximum percentage.
Q. Does the amount of
the death benefit provided through a Mortgage Protection Life &
Disability Insurance program decrease annually along with the mortgage
balance?
In the past, a decreasing death
benefit was a fairly common feature associated with a Mortgage Life
Insurance program. In fact, many of the key insurance carriers in
the Mortgage Protection market still offer the option of having a
decreasing death benefit. However, these days just about everyone
who purchases a Mortgage Life program purchases a program with a level
death benefit. The reason is that Mortgage Life Insurance programs
are most commonly term life insurance products. With modern advancements
in medicine, early detection of potential health risks, etc. people
are living longer today on average than say 10 years ago. The trend
for term life insurance products lately has been that rates are continually
dropping. The most competitive rates for coverage today are available
on level death benefit, term life insurance products and most of the
insurance carriers have structured their Mortgage Life Insurance programs
based on a level death benefit platform to be able to offer a more
competitive Mortgage Protection program. When you compare rates these
days you’ll find that you can buy a program with a level death
benefit for the same price, and in many cases depending on the carrier,
for less money than you can buy a program with a decreasing death
benefit. Why buy a decreasing death benefit when you can have a level
death benefit for the same money or less?
Q. Who is the beneficiary
of the benefits provided by a Mortgage Life & Disability Insurance
program?
Your family! Some people are
under the impression that the lender is usually named as the beneficiary
of these programs. Not true! These are individual programs taken out
on you and/or your co-borrower. You will name a beneficiary that will
apply these funds at their discretion or according to the terms of
a will and so on. The main idea behind these programs is that the
death benefit be applied to pay off the remaining balance of the mortgage.
However, the decision to do so will be solely up to you or your named
beneficiary usually one’s co-borrower, spouse or adult children.
As is common with any life insurance death benefit, the death benefit
provided through a Mortgage Life & Disability Insurance program
is tax-free.
Q. Is the Mortgage Life & Disability Insurance Program
tied to my current home or is it portable?
The program is on you, goes
with you and can be used to pay off any mortgage that you have in
place at the time of death. Many people will make *adjustments to
their existing Mortgage Protection program when they move from the
home that the benefits of the program were based upon to a new home
especially if the amount of the mortgage on the new property is greater
than the previous mortgage balance. Ask your Mortgage
Protection Solutions Inc.
for complete details.
Q. How does the optional
disability insurance rider work?
The optional disability rider
available on many Mortgage Life & Disability Insurance programs
is one of the most popular combination programs written. Many people
really like this combination program because it provides a very comprehensive
coverage package that covers an individual not only in the case of
their premature death but also provides a monthly disability benefit
in the event that they become sick or injured and are not able to
work. The rider is written for the amount of the total house payment
including taxes and insurance and pays up to 2 full years after satisfying
a very standard 90 day elimination period. Many are aware that your
chances of becoming disabled are just as high if not higher than dying
prematurely. For many, having the optional disability protection rider
can mean the difference between being able to remain in the home in
the event of disability or not. This combination program costs a little
bit more money each month than just the premium for the basic death
benefit, but it is still extremely affordable. If you’ve ever
shopped for individual disability insurance, you’ll find that
you can buy a Mortgage Protection Life & Disability Insurance
“combination” program for the same money or less than
the disability insurance alone. That’s why 99.9% of those buyers
seeking primarily disability protection will purchase that coverage
through a combination program. Beyond just the cost, many people will
purchase disability protection to pay their house payment through
a combination life & disability insurance program because they
are a lot easier to qualify for than an individual disability insurance
program. The disability protection rider available through a Mortgage
Protection Life & Disability Insurance program is not underwritten
anywhere near as strictly as individual disability products and applicants
are not required to prove their income by providing 2 years W-2’s
or 1099’s. Ask your Mortgage
Protection Solutions Inc. representative for
complete details.
Q. What is Return of Premium?
The Return of Premium rider
is an excellent way to do a number of different things as it applies
to Mortgage Protection. First and foremost, Return of Premium is exactly
what it sounds like. It’s an optional rider that will refund
every dollar paid in to the program over the life of the policy if
you do not use the coverage (i.e. die or become permanently disabled).
It is a dollar for dollar return of premiums paid at the end of the
coverage period and your return of premium payment is tax-free. There
is no gain on the money during the contract period therefore the return
of premium is not taxable when it comes back to you. Many people really
like this rider because it is a way to get the insurance protection
that you need to pay off your mortgage and if you don’t die
or become disabled, which is hopefully the case, it’s as if
you were putting away a set amount of money every month that you get
back at the end of your coverage period. Many people like to think
of it as an alternative savings program. Lots of people aren’t
great savers today, so this is an excellent way to do it. In addition
because the optional return of premium is nothing more than a large,
lump-sum return of your money, many people will use their return of
premium payment to accelerate their mortgage by applying the money
towards any balance still owed on the original mortgage, a second
mortgage or an equity line of credit. Still others will use it as
a lump sum payment for a new, possibly paid up, personal life insurance
policy after the coverage that they had for their mortgage terminates.
There are several possible uses as you can probably imagine, so be
sure to ask your Mortgage
Protection Solutions Inc. representative for
complete details.
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