Mortgage life insurance helps to pay your mortgage if you become disable and can't work. It can help keep you in your home.
Written by Les Masterson
Les Masterson
Les, a former managing editor, insurance, at QuinStreet, has more than 20 years of experience in journalism. In his career, he has covered everything from health insurance to presidential politics.
Reviewed by Leslie Kasperowicz
Leslie Kasperowicz
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at Insurance.com.
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Your home is likely the biggest purchase you’ll ever make, but homeowners insurance isn’t the only way to protect this significant investment. Mortgage disability insurance offers additional coverage to help keep you in your home if you’re disabled and can’t work.
If you plan to purchase a home or are already a homeowner and don’t yet have mortgage disability coverage, you might consider purchasing a standalone policy or adding it as a disability rider to an existing mortgage life insurance policy.
Here’s what you need to know about mortgage disability insurance.
Key Takeaways
Mortgage disability insurance covers mortgage payments if you become disabled. A policy provides monthly income to cover your mortgage payment if you can no longer work. It’s different from mortgage life insurance, which offers a death benefit to help your family pay for mortgage-related expenses after you die.
Mortgage disability is typically best for people who are in high-risk occupations, such as roofing or fishery, who have a greater likelihood of injury on the job.
“Mortgage disability insurance should be considered by homeowners who would have limited or no ability to pay their mortgage if they became unable to work due to sickness or injury,” says Anthony Martin, CEO and owner of Choice Mutual, an independent insurance agency.
Mortgage disability insurance is connected to your mortgage, which is different from traditional long-term disability insurance. Long-term disability insurance pays a percentage of your salary, usually 50 to 60%.
A homeowner should consider a mortgage disability policy if the premiums are substantially less than buying additional general disability insurance. General disability insurance, however, offers more versatile, robust coverage.
Dr. Nicole Maestas
Associate Professor, Harvard Medical School’s Department of Health Care Policy
Director, Retirement and Disability Research Center, National Bureau of Economic Research
“While general disability insurance payments may enable someone to continue making their mortgage payments, they may also help them pay for other important needs such as food, clothing, out-of-pocket costs for medical care, devices or prescription drugs.”
Anyone with a mortgage may be interested in getting a policy, but ideal candidates for mortgage disability insurance are:
“Since most of these policies are simplified or even guaranteed issue, people with health conditions can benefit from them, as well,” Anthony adds. “If you work in a hard-to-insure occupation, such as restaurant service, then mortgage disability insurance may be your only option to protect yourself and your home.”
You can apply for a mortgage disability insurance policy through your mortgage lender after you close on your home. You also can get a policy by applying directly through an insurance provider or an independent insurance agency.
Most mortgage disability policies are either simplified or guaranteed issue.
The underwriting requirements for these policies aren’t as strict. That means you’ll likely pay a higher premium for mortgage disability insurance but get less coverage.
On the other hand, long-term disability insurance often requires a medical exam and questions about your health. Long-term disability can be cheaper, but you may have more trouble with eligibility based on your health history and employment.
“Minor health issues, such as high blood pressure, controlled diabetes or cholesterol, to name a few, are not going to prevent you from qualifying (for mortgage disability insurance),” Martin says. “Mortgage disability policies are more forgiving than traditional disability insurance when it comes to pre-existing health conditions and it is easier to get an approval.”
Disability insurance companies use your mortgage amount, health, age and occupation to determine your mortgage disability insurance premiums.
“Like most insurance products, the cost for each person will vary depending on a variety of factors. Most of the time, mortgage disability coverage is often less expensive than traditional disability insurance, but only because the benefits are extremely limited,” Martin says. “Assuming you are in good health and comparing similar benefit amounts and lengths, you will pay more for a mortgage disability insurance policy than other disability insurance products.”
One way to offset costs is to shop around and weigh all your options, Martin adds.
Martin suggests paying attention to the benefit and elimination periods when shopping for a policy. The average benefit period for long-term disability is 34.6 months, “so making sure that your mortgage disability policy lasts at least that long is important,” he says.
Along with cost, Maestas points out a number of mortgage disability insurance policy components you should examine:
