Understanding Riders on Mortgage Disability Insurance

by Brandon P. Nadeau
There exist only two mortgage insurance products. Mortgage life insurance pays off your mortgage if you pass on. This kind of insurance can be decreasing term or fixed; your type of mortgage will determine that. There is mortgage disability insurance, which is intended to guarantee that your home loan 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, homeowners have some choices about the full nature of their policy.

First make sure you understand whether you have picked a partial disability policy, with a predefined bebefit or a residual policy, that has an amount based on current salary.

A home owner could also choose a short term disability benefit whereby the policy would only pay benefits for a shorter, specified length of time, such as two years. 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 types of insurance a homeowner can choose, there are number of optional features, or riders, that can be attached to a policy. They may be: guaranteed renewable policy, non cancelable policy, guaranteed future insurability, inflation protection and waiver of premium.

Inflation Protection

Purchasing this rider will mean that your benefit will go up as inflation goes up. This protects against the disability payments falling way short of the required payments in the future.

Guaranteed Future Insurability

A rider such as this will let the policy holder increase the amount of the policy if the value of the house grows, without having to reapply for the mortgage insurance.

Guaranteed Renewable Policy

As long as premiums continue to be paid, the insurance will be renewable, although premiums may be increased to maintain the same coverage.

Non-Cancelable Policy

A policy that is non cancelable carries a rider that fixes its renewability, and, as long as the premiums are paid, the premiums cannot be raised.

Waiver of Premium

Once you start collecting a benefit, the premiums are no longer due under this rider. This means that when you are disabled, you do not have to keep on paying the premiums on your mortgage disability policy.