Mortgage
Protection Life & Disability Insurance “Q&A”
These are just a few of the questions that
many buyers often ask. Your Life
Health Specialties
representative has the answers to all of your questions so pick up
the phone and give us a call today!
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 Life
Health Specialties
representative 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 Life
Health Specialties 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
Life
Health Specialties
representative for complete details.
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