Buying a home means taking on big debt and for most people, that’s not an issue. Before you bought your house, you’ll have made sure you can afford your mortgage repayments over the next few decades. But you can’t predict the future. If you’re suddenly unable to work, how will you meet those repayments?
If you’re struggling with your health or have an accident, the last thing you need to worry about is the possibility of losing your home. Mortgage repayment cover can help by making sure your home loan repayments are paid if you become sick, injured or disabled – and therefore can’t work.
Here we answer all the big questions about mortgage protection insurance, so you can make the best decision for yourself and your family.
Should I have mortgage repayment insurance?
This all depends on your personal circumstances. Figure out what’s important to you and how you might cover your mortgage repayments if you can no longer work for health reasons.
Think about your entire financial picture. Do you have a great financial nest egg that could cover you for a few months? Or perhaps you have other stopgaps, like additional properties you could sell in a pinch.
If you have a family, losing your home raises the stakes – you won’t have the flexibility you once had. If you’re like most people, you don’t have the cash reserves to cover a big shortfall in your earning, so getting mortgage repayment insurance can be a very smart move.
Who is eligible?
There’s no blanket rule for all insurance policies – every company will have slightly different regulations. Generally, to claim on your mortgage protection insurance you need to:
- • Own/rent your own home and have a mortgage
- • Prove that you’re unable to work and earn
- • Be a New Zealand citizen, visa holder or resident
How much cover can I get?
Most insurance companies allow you to cover 110% – 115% of your mortgage repayments, so you can use the additional money to cover other expenses. You’ll be entitled to regular pay-outs for a specific period – this can range anywhere from one year to when you turn 65 or 70, depending on the policy and insurer.
Think long-term when choosing a policy that’s right for you. If you get a sickness/illness at age 40 and it’s unlikely you’ll ever be able to work again, if you’re only covered for five years you’ll be in a pretty sticky situation.
Why get mortgage protection insurance when there’s ACC?
Mortgage protection insurance doesn’t have the same restrictions – and it doesn’t matter how you get sick or injured. Here’s why it’s helpful:
- • Payments on your mortgage Mortgage protection insurance covers your mortgage repayments to ease the financial burden on your family.
- • No ACC offset The insurance company will still cover your mortgage repayments even if you’re receiving a compensation payment from ACC.
- • Self-employed individuals Their ACC income depends on IRD filed income, chosen sum assured and occupation class.
Should I choose affordable premiums or a shorter excess period?
The amount you pay each month will depend on the policy term, but your premiums will be based on your mortgage obligations and current income. When you secure a policy, you can choose how long you wait before you’ll receive a pay-out. If you choose a lower-cost policy with a longer waiting period, you’ll need some savings to fall back on while you wait for the payments to kick in.
If you think this would be difficult, you might want to consider taking a shorter wait period – but this will come with a higher premium. Every situation is different – talk to a professional to ensure you get a policy that’s right for you and your family.
Additional Features available within the cover
Depending on insurer you can choose below benefits as add-ons or riders
- • Dependent care option
- • Partial work benefit
- • Specific injury/illness benefit
- • Income Top-up
- • Mental health related addition benefits
- • Post recovery support
What won’t be covered?
In some instances, you’ll not be covered by your insurance policy. Before you sign, make yourself aware of what these are so there are no nasty surprises come claim time. Some exclusions may be:
- • Some pre-existing medical conditions
- • Loss of income due to pregnancy
- • Suicide, or attempted suicide, resulting in injury
- • Any injury or illness caused by criminal behaviour
- • Any case where the policyholder is in prison
- • Loss of income from redundancy (some insurance companies will let you add this to your policy for an additional premium).
Make sure you’re covered for the things that matter
For most people, meeting their monthly mortgage repayments relies on them being able to work. But if something happens and your health takes a turn for the worse, the last thing you’ll want to think about is the roof over your head.
Taking out mortgage protection insurance can help give you peace of mind. At Global Finance, we’ll assess your personal and financial circumstances to ensure you strike the right balance between affordability and what you need for your family – so you can be confident that you’re covered for the things that matter.
Have a mortgage protection inquiry? Talk to the team at Global Finance today to find out more.