Mortgage disability insurance

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PostPosted: Sat Sep 04, 2010 11:53 am   Post subject:   

Quote:
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!
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PostPosted: Sun Sep 05, 2010 1:30 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.



Quote:
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.



Quote:
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.

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PostPosted: Sun Sep 05, 2010 1:33 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.


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PostPosted: Mon Sep 06, 2010 5:27 am   Post subject:   

Quote:
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.
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PostPosted: Mon Sep 06, 2010 1:00 pm   Post subject:   

Two things.



Quote:
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,



Quote:
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.


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PostPosted: Tue Sep 07, 2010 3:01 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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PostPosted: Tue Sep 07, 2010 6:02 am   Post subject:   

Quote:
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 maybe next the agent will come back with a mortgage accidental death policy, as part of the sales strategy. And then an accident-only, hospital-only indemnity policy. And later add an at-home benefit for sickness. This is exactly why people get to the saturation point -- and believe they are being premiumed to death.



There's no doubt that many people could benefit from having "mortgage-only" life/disability coverage, compared to nothing at all. But if no agent has ever explored the concept of covering all/most of a person's total need with proper amounts of insurance, then the insured may be under the impression that the insurance will do more for him/her/heirs than the policy provides.



Quote:
It's a sales strategy




Maybe so, but it's not one that I would use.



It's sort of like the whole mortgage mess that derailed the economy -- like the mortgage broker saying to folks, "OK, so you really want to live in a home that you can't afford. I can appreciate that -- I live in one like that, too. So here's what we'll do, we'll start you with a 1% note for 30 years, due in 12 months -- that way the payments are really low, and you'll qualify for the loan. A year from now, the payments will go up some, but we'll come back and refinance your loan for free, so you won't have to pay all the closing costs again. And with real estate values going up all the time, why you'll have great equity and that will lower your interest rate."



Sales strategy . . . sounds good in theory, and worked for a few years, but is just about 100% BS. And now the rest of us are paying the price for that.



We don't see "sales strategies" in homeowner's insurance that say, "Well, let's get started with 80% coverage, and in a year or so, we'll increase it to 90%, and once you get used to that, we can go ahead and increase it to the full 100%."



I acknowledged in my first response that there wasn't anything wrong with mortgage life or disability coverage. My concern was for the OP to understand that he needs to look at the big picture and evaluate what his true needs are and make sure those are covered. If he doesn't need the additional income a DI policy might provide, fine, then he doesn't need it. An agent with a "sales strategy" may also have a commission-perspective rather than a coverage-perspective, and the sales presentation could be rather myopic.



But if the vast majority of people with DI insurance had that kind of coverage (to pay only the loan payments), they'd be very sorry they didn't buy more complete coverage . . . as they're being displaced for other reasons for which money would have been the answer.


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PostPosted: Tue Sep 07, 2010 10:18 am   Post subject:   

It's a fine sales strategy if someone's job title is "mortgage disability salesman". It's a terrible purchase strategy for a person looking for protection. It's a terrible sales strategy for an insurance agent who is truly trying to do what is best for his clients.


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PostPosted: Mon Sep 13, 2010 3:08 pm   Post subject:   

Quote:
It's a terrible purchase strategy for a person looking for protection. It's a terrible sales strategy for an insurance agent who is truly trying to do what is best for his clients.




Exactly. Just fewer words than I used.


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PostPosted: Wed Dec 21, 2011 10:57 am   Post subject: Mortgage Murfreesboro  

am working on a report in which all the banks giving loan for mortgage and in case of no return payment they made some hard decisions. What do you think about it? Is it right to not getting mortgage and vacate the house and take everything from the person..


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PostPosted: Thu Jan 05, 2012 11:48 am   Post subject: mortgage chattanooga  

Nowadays managing money is such a difficult task especially when you have limited income and unlimited expenses. In this case either you should cut down your expenses or you should find someone to give you money! If nothing as such happens, you will find yourself in trouble.

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PostPosted: Mon Sep 17, 2012 8:30 pm   Post subject: Disability and homeownership  

I have been on disability since 2009 and cannot work. I would really like to buy the home I am renting, having actually begun the process, and I will be able to. My concern is this: Will the government have any claim to my home in the event that I die before it is paid off (which is almost certain because of my disability), or can the mortgage be transferred to my kids? Both of my sons have said they would willingly take over the payments and keep the house if I died, yet neither of them have good enough credit that I would qualify using them as a co-signer.


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PostPosted: Wed Sep 19, 2012 12:37 pm   Post subject:   

The home will be a "recoverable" asset in the event you receive assistance for your health care expenses, including long term care, from MEDICAID, but not Social Security Retirement or Disability benefits.



Social Security Retirement and Disability benefits (and even SSI payments) are "non-recourse" payments -- the government will not come looking to recover that money.



If your concern is losing the property after your death, then don't "own" it in the first place. Put it into an irrevocable trust or title it in the names of your sons and pay the mortgage payments (up to $13,000 each per year) as "gifts" to your sons. If you are married, you and your spouse could each gift $13,000 -- $26,000 combined -- to each of your sons, for a total of $52,000 per year to both.



Not only does that escape gift taxes, it reduces your taxable estate -- and estate taxes will be coming back in a big way in 2013 if Congress fails to act in the remaining 13 weeks of 2012.



Talk with an estate-planning attorney and/or CPA for more information about this. If you do it right from Day One, you will avoid any estate tax liability on the value of the home, if any,



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