The Role of Disability in Mortgage Foreclosure

Disability is one of the leading causes of mortgage foreclosure because it can suddenly reduce or eliminate a person’s ability to earn an income. Without a steady paycheck, homeowners may struggle to keep up with monthly mortgage payments, increasing the risk of missed payments, default, and eventually foreclosure. Disability income insurance can help replace a portion of lost income, making it easier to continue paying essential expenses such as a mortgage, utilities, and other household bills. Having adequate disability coverage can provide valuable financial protection and help families stay in their homes during a serious illness or injury.

Disability insurance coverage is one of the most overlooked, under-attained coverages in the United States, even though the availability of it is on the rise. About 100 million workers are without disability income insurance. There are several reasons for this disturbing trend, however, and unfortunately, once a worker has been deemed disabled, it’s too late to attain coverage. Certainly, the role of disability in mortgage foreclosure can be significant.

 Because 90% of wage earners rate their ability to earn an income as very valuable in helping them achieve long-term financial security, once that income disappears, everything is at stake, from the ability to buy food and clothing to their ability to pay their car insurance and mortgages.

Are You at Risk for Becoming Disabled? 

Working Americans by far underestimate the risk of becoming disabled – 64% of wage earners think their chances are only 2% when, in fact, the chance of becoming disabled for 90 days or more is about 30%. Medical bills contribute to over 60% of personal bankruptcies that are filed, and they also contribute to more than half of all home foreclosure filings. It’s been estimated that disability causes foreclosure 16 times more often than death does.

What Disability and Foreclosure Assistance Programs are Available?

Since 2007, more than 6 million homes in the U.S. have been lost to foreclosure. Homeowners facing foreclosure in Florida, Illinois, New Jersey, and California were surveyed in 2008 by researchers, and nearly half of those homeowners claimed that medical issues were at least part of the cause of those foreclosures.

There are programs available that can help prevent foreclosure in times of disability; however, they generally fall far short of what is needed. The application process for a variety of federal programs designed to assist those who are disabled often presents hurdles that many applicants never clear.

For example, Social Security Disability offers monthly payments for disabled citizens; however, most applications are denied and must go through appeals processes, and even then, may never be approved. In addition, the average SSDI payments by themselves are not enough to sustain a family’s current standards of living. It is designed to be supplemental income.

90% of applicants for SSDI face negative repercussions while waiting for their award, which includes bankruptcy, missed mortgage payments, savings accounts depleted, foreclosure, and others. The other programs available for assistance are also often put out of reach due to the income disabled people receive from SSDI and other programs.

What is the Solution to Avoid Foreclosure Due to Disability

 Disability insurance is designed to provide monthly income payments to those who suffer an illness or injury and cannot participate in work activities for an extended amount of time. There is short-term disability and long-term coverage available. Disability often means the difference between having enough income to maintain mortgage payments and having to file for foreclosure. 

Having coverage already in place before an illness or accident occurs means workers will not have to rely solely on that other assistance, which often never becomes available or becomes available too late to save a mortgage. Disability income insurance can be likened to living death insurance and will provide salary replacement when an insured worker is unable to work due to illness or disability. Can you afford not to carry a disability insurance policy?

We can help you find the very best disability income insurance policy to meet your needs. Get a free quote now; feel free to contact us with questions or concerns. We’re here to help you find the disability insurance plan that will help you rest easy, avoid foreclosure and financial disaster, and give you peace of mind should you ever become disabled. Contact us today, or get started with your free disability insurance quote.