Mortgage disability insurance provides resources to mortgage holders who become incapacitated and cannot make mortgage payments. It requires a medical authority to declare the homeowner disabled and unable to work. It helps protect the homeowner from foreclosure and is sometimes required by lenders. The coverage varies depending on the insurance contract.
Mortgage disability insurance is a type of insurance coverage that provides resources to mortgage holders in the event that they become incapacitated and can no longer generate income to make mortgage payments. Sometimes referred to as disability mortgage insurance, the terms of the coverage normally require a recognized medical authority to declare that the homeowner is temporarily or permanently disabled and unable to work or use other sources of income to make payments. Taking out this type of coverage helps protect the homeowner from the possibility of foreclosure at a time when he needs to focus more on health issues and recover or develop the skills to cope with a lifelong disability.
While many consumers don’t think in terms of a serious illness or disability occurring during their working years, the chance of experiencing at least an extended period when the homeowner is unable to work is relatively high. Without the presence of mortgage disability insurance, the chances of losing your home during this time are significant. This is especially true if the homeowner has relatively few financial resources other than the income generated by performing work that he or she cannot perform while ill. From this point of view, maintaining mortgage disability insurance can help ease worries about at least some of the family finances and allow the homeowner to focus on improving and eventually returning to work.
Lenders tend to be in favor of mortgage disability insurance, with some making it necessary to secure and obtain this type of coverage as part of the criteria for approving a mortgage application. In some cases, the cost of the premium is combined with the monthly mortgage payment and forwarded to the insurance company on behalf of the homeowner. Because the coverage helps minimize risk for both the homeowner and the lender, it’s not unusual for banks and mortgage companies to negotiate special rates for this type of insurance plan that are then passed on to homeowners.
The scope and structure of the coverage provided by mortgage disability insurance will vary slightly, depending on the terms and conditions in your insurance contract. Many contracts will include detailed information about the types of health issues covered. For example, some will require the homeowner to be out of work for a specified amount of time and certain other benefits to be used up before the insurance plan begins covering mortgage payments. Some policies are structured to make payments directly to the mortgage lender on behalf of the policyholder, while others require claims to be filed after each mortgage payment, allowing the insurer to verify the payment to the lender and then repay. the insured.
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