YOU ASK:

Is mortgage disability insurance a good idea?

WE ANSWER:

Yes, it essentially is.

Mortgage disability insurance will protect your investment so that you don't have to face the forfeiture of your home in the event that you become disabled. After all, a real estate purchase is a major investment. And you don't want to forfeit on your payments, especially if you have been able to pay off a huge chunk of the loan.

What happens is that when you are pronounced disabled due to sickness or an accident and are unable to pay the monthly mortgage amortizations, the insurance will start paying for these. Usually, you will have to wait for around one to two months where you are expected to continue with the payments and then the insurance will start to make the payments after the waiting period.

The insurance will pay from 6 to 12 months of your mortgage. After that it is assumed that you are either able to get back to work or another person (such as your spouse) has decided to be the bread winner and to cover the mortgage payments.

It is sensible to get this kind of coverage as you cannot simply rely on your savings to cover for expenses that you have during the time of your disability. Your savings could run out by even before you can get back to work or before a spouse is able to get a job.

You should check, though, if you have some form of disability protection from your employer. This may help to cover your monthly expenses, including mortgage payments so that you may not need to get an additional mortgage disability insurance cover.

Remember that having an additional insurance that covers for the same eventuality will not give you more money - only one insurance will kick in. Or, in some cases, you can get from both but there are some mortgage disability clauses that limit the amount of payments you can receive. For example, a mortgage insurance policy may only pay up if you are receiving work disability benefits that do not exceed 50% of your monthly income from your employer.

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