Insurance and Credit

Understand what you purchase before you buy is always important, but no more so when it comes to disability insurance. Find out about the different kinds of insurance so that you can choose the right one.

One important feature is what the definition of disability is according to the policy. This may be very critical to protect yourself. Be sure whether it covers whether it covers “own occupation” or any occupation”. Your own occupation is what your job is in, and if you can no longer earn a salary in that area, it is understood that your income will be greatly reduced. This feature means the policy will only cover you if you cannot perform any occupation, no matter what it is. Imagine an airline pilot who has been demoted to a clerk.

If you expect to make a comparable salary if you are disabled, but you opted for the “Any Occupation” definition, you may not be eligible for your disability insurance and be forced to take a low paying job. It is important to make sure you amply insured to substitute your old salary.

The next area of question is the benefit period. Normally this goes to 65, but some people might have income expected before this age, and therefore can be sure of not needing the benefit all the way until that age. Retirement funds that become available, or a spouse’s social security may mean that you may not need coverage until 65 after all.

The benefit amount is something that should be carefully examined when you are purchasing a mortgage disability policy. You should calculate collecting at least the amount of the mortgage payment. However, if you have lost your entire salary, will you be able to keep up with taxes, hazard insurance and maintenance? Of course, insuring these will raise the premiums, but it is a good idea to do the cost/benefit analysis.

It is important to understand the basics of an insurance policy. Some policies can also carry riders, which are optional benefits you can subscribe to.

The inflation protection rider is a popular one. Your monthly benefit will go up as the cost of living goes up. Inflation is a fact of life, and you may need to protect against it. There are two kinds, simple, where a percentage is added to the amount received, or compound, which compounds previously granted increases.

Some other riders that might be offered to you are non cancelable policy, guaranteed renewable policy, guaranteed future insurability or waiver of premium.

Tags: home, Insurance, life insurance, mortgage, mortgage life insurance, real estate

This entry was posted on Saturday, June 6th, 2009 at 7:40 am and is filed under Life Insurance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.