by Guest » Tue Aug 31, 2010 08:47 am
I just wanted to make sure that my family members don't face any problems with our home even when I'm not there. So I got this mortgage life insurance. Now, the agent has come up with another offer - mortgage disability insurance. Is it really that important to us?
Posted: Thu Sep 02, 2010 04:01 pm Post Subject:
if you are earning well enough and are so much concerned about what will happen to your mortgage on the event of disability then you can think about buying that insurance policy.
You are missing the entire point, and I think it's because you don't understand insurance products well enough.
"Earning well enough" stops when the disability occurs. How will the other expenses of life be paid for when the income stops because the person is disabled? Your naivete on this aspect of disability is glaring.
I would be more concerned about caring for my family's entire needs than simply paying the monthly mortgage payment. And that's what I communicate to my clients.
Same is true when it comes to death. Pay off all the debts, yes, but also leave additional resources for the family to draw upon.
Posted: Thu Sep 02, 2010 10:08 pm Post Subject:
Of course its better to get insured for your untimely death.
Why? One's odds of dying during their working lifetime are less than their chance of becoming disabled.
Posted: Fri Sep 03, 2010 07:01 am Post Subject:
Why? One's odds of dying during their working lifetime are less than their chance of becoming disabled.
True, but then think of the risks too. Even when you're partially disabled you may qualify for certain professions. Also, you'd be there to support your family with guidance.
On the other hand, when you're not there you family might come across hardships.
Posted: Fri Sep 03, 2010 12:02 pm Post Subject:
Max,
Thats right i am not as well aware as you are about different insurance products.
But then happens to the mortgage if the person becomes disabled and is not able to work?How to best cover that, will just disability insurance be enough?
I completely agree that one should strive to earn as much so that on an event of death you leave behind enough to pay off debts and some extra for your family to live off it.
Posted: Sat Sep 04, 2010 11:53 am Post Subject:
But then happens to the mortgage if the person becomes disabled and is not able to work?
If he has PMI (Private mortgage insurance), then there shouldn't be any reason for him to worry. The lender will then be compensated. Disability insurance is used to compensate for the lost wages I guess!
Posted: Sun Sep 05, 2010 01:30 am Post Subject:
Steven, if one becomes disabled, their family doesn't need guidance, they need money. If one is working because they need their income, they should be attempting to protect that income if they get sick or hurt and can't work.
But then happens to the mortgage if the person becomes disabled and is not able to work?How to best cover that, will just disability insurance be enough?
What happens is the mortgage doesn't get paid and the family is in trouble. If enough disability insurance is purchased, the family should be in fine financial shape.
If he has PMI (Private mortgage insurance), then there shouldn't be any reason for him to worry. The lender will then be compensated.
Huh? PMI protects the lender to a small degree. It does nothing to protect the homeowner. The fact that the owner has paid for PMI does not relieve him of the obligation to pay the debt. PMI isn’t going to stop the bank from foreclosing on the homeowner. The only benefit of PMI to the homeowner is that it will allow the purchase of a house without a 20% downpayment.
Posted: Sun Sep 05, 2010 01:33 am Post Subject:
Let's make the subject of disability insurance as simple as possible. Jim has two job offers. Job A pays him $50,000. Job B pays him $49,000. With Job A, if he becomes sick or injured and can't work, his income stops. With Job B, if he becomes sick or injured and can't work, his income continues.
Buying disability insurance is the equivalent to choosing Job B. It's obviously more complicated than that, but from a conceptual standpoint, that's it in a nutshell.
Posted: Mon Sep 06, 2010 05:27 am Post Subject:
It's obviously more complicated than that, but from a conceptual standpoint, that's it in a nutshell.
It's could be a tough decision at times. Jim then has to take into account all the risk factors associated with his current job, and then decide whether to go for the option B.
Posted: Mon Sep 06, 2010 01:00 pm Post Subject:
Two things.
If he has PMI (Private mortgage insurance), then there shouldn't be any reason for him to worry. The lender will then be compensated.
Juanita . . . turn in your moderator's credentials. PMI provides no benefit at all to the person making the mortgage payments -- healthy or disabled -- and, thus, paying the PMI premium. PMI is only a protection for the lender if the loan defaults and the lender cannot recover all its costs to dispose of the property.
It's not much different than you coming to me to buy life insurance, agreeing to make the payments, and I am the irrevocable beneficiary. What benefit does that provide to you or anyone you love?
Second,
It's could be a tough decision at times. Jim then has to take into account all the risk factors associated with his current job, and then decide whether to go for the option B.
Steven, you seem to be missing the whole concept of disability insurance, and this is just making it worse.
It's not about choosing "Option A" or "Option B". It has nothing to do with which job has more or less risk. That example was a pretty good picture, and you missed it entirely. It might be said that your camera is turned on, but there's no film inside.
Disability insurance is PAYCHECK PROTECTION. If you cannot work, the money you count on to fund the other aspects of your life -- paying the mortgage, putting the food on the table, keeping the kids clothed, and so very much more -- will stop when you stop working.
Unless you have a disability income policy. Then, assuming you meet the definition of disability ("own" or "any" occupation), and are disabled the required minimum number of days (the "elimination period"), then you will begin receiving a monthly income (usually 60% or 70% of your pretax wage) for as long as the policy provides its benefit (could be a few months, a couple of years, to age 65, or even lifetime).
The original post was about mortgage disability protection. That's fine, if the only thing a person needs to be concerned about is paying the mortgage. But it's woefully insufficient, if the other expense of life are still hanging out to be paid.
And . . . I've never seen a mortgage disability policy that uses the "own occupation" definition. Meaning, you might not qualify for a benefit, even though disabled, if the insurance company thinks there is something you can do to earn about the same amount of money as your policy would pay.
Posted: Tue Sep 07, 2010 03:01 am Post Subject:
Chatter on folks, but let's just get to the real solution for the OP.
Based on what was written originally, I'm thinking the OP was doing business with an agent who was trained in the art of selling insurance specifically to a very easily identifiable need. There is nothing wrong with this approach. Could be a tad on the lite side of coverage overall, but it gets the job done. The agent then proposed using disability insurance for the same reason. This was a more common approach to disability insurance sales years ago (as a product it has stiffen up quite a bit). In fact, there were some companies that offered a disability product that was sort of an add-on sale to a life insurance purchase that could be used for exactly this purpose. (Note other agents: don't confuse this with waiver of premium rider, it's a completely different thing).
So now the agent has made two sales for two different products and used one focal point of the OP's life to make those purchases seem important. It's a sales strategy. And please do not misunderstand. I do not make that comment to demean the importance or suggest a purchase should not take place.
In sum, to answer the original question which was (I'll paraphrase): is it really that important to have disability insurance that would make my mortgage payments? And my answer is that entirely depends. It depends on if you want to live in the house if you become sick or hurt and cannot work, or if moving in with the mom and dad or the in-laws is more your definition of a good time.
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