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Friday, June 5, 2009

Canada Mortgage Insurance: Getting Mortgage Disability Insurance

By Kevin S. Salin

Understand what you buy before you buy is always critical, but no more so when it comes to disability insurance. Make sure you understand the various features so you can make an intelligent comparison of every policy.

First of all, be sure you understand the policy's definition of disability. This is an important component, especially when you have a highly specialized career. Be sure whether it covers whether it covers "own occupation" or any occupation". Your own occupation is what your career is in, and if you can no longer earn a salary in that field, it is understood that your income will be greatly reduced. Limiting your coverage to any occupation means that as long as you can do a job, you will not be eligible for benefits. Picture an airline pilot who can be demoted to a clerk.

If you expect to earn a comparable wage if you are disabled, but you opted for the "Any Occupation" definition, you may not be eligible for your disability insurance and have to to take a low paying job. It is important to be sure you amply covered to substitute your old salary.

The next area of concern is the benefit period. The typical benefit period is to age 65, but if you are able to supplement your income in some way before the age of 65, you can substantially reduce your premiums. For example, you may have retirement funds that become available or you may have a spouse who starts to collect social security and that income can be used.

The amount of the benefit is a significant feature of the policy. You should figure on collecting at least the amount of the mortgage payment. But there are additional costs involved with maintaining a home, that you may not be able to afford unless you cover them with your disability policy: property taxes, fire or other hazard insurance, maintenance costs. You have to calculate if the additional premium makes it worth while to cushion the benefit.

Those are the basic components that will fix the coverage and premiums of your mortgage disability insurance. In addition, be clear the riders that will be shown to you.

If you are concerned about the cost of keeping your home increasing, you should think about the inflation rider. With this, the amount of the benefit increases along with the rate of inflation. Inflation is a fact of life, and you may want to protect against it. You can get a simple inflation rider, where a prefixed inflation factor is added to your monthly benefits, or it may be compound, where the inflation is added every year (compounded).

Some other riders that might be offered to you are non cancelable policy, guaranteed renewable policy, guaranteed future insurability or waiver of premium. - 23211

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