Do I Need Mortgage Protection Insurance? Protecting Your Most Important Asset
While it’s good to be optimistic, recent years have shown us that the world can change dramatically in a moment: The COVID pandemic left many sick and unemployed, and with recession hitting New Zealand many are struggling to keep up with the rising cost of living: especially homeowners battling large repayments.
If you own a house and have a mortgage, and there’s a possibility you’ll get sick, injured or unemployed and therefore no longer receive an income – then yes; you need Mortgage protection! Remember, ACC only covers you for accidents, not illness. So, in the unfortunate event that you fall ill, you could be left extremely vulnerable and financially insecure.
Not to mention the loss of income for non-health reasons.
Peace of mind
By definition, mortgage protection is a safety net for your monthly property repayments if you are unable to make them as stated by your policy length. This includes illness, disability, redundancy and mental health issues. You are protecting your most important asset, and therefore, the comfort and security for yourself and your loved ones.
According to Money Hub, “Mortgage protection insurance cover can be useful for giving peace of mind when you lose your ability to earn. The policy is designed to help you meet your mortgage repayments until you return to work.”
Most Kiwis are Unprepared
Imagine this: you are no longer receiving your fortnightly paychecks. Can you continue to pay your mortgage? If the answer is no, then you should seriously consider mortgage protection insurance.
The Financial Services Council (FSC) of New Zealand conducted a 2022 survey; it uncovered that most employed Kiwis have less than 6-months worth of expenses saved, while 40% would be unable to access $5,000 - without going into debt - if something unexpected were to happen to them. (Fidelity)
Important facts to note:
1. Price does not equal quality
Your mortgage is a long-term thing, and so too is your insurance! Ensure you get the right cover for you so that you don’t overpay. Think, 10 years of overpaying by $200 adds up to $2000 wasted! You could have booked a holiday to Bali instead.
Mortgage protection varies based on age, minimum wait period before claiming, and the cost of your mortgage repayments. Get in touch with us today for a free quote.
2. It’s flexible
The good news is, mortgage protection is available on short term contracts such as 2-5 years. It’s important to note that the shorter the cover period, the lower the insurance cost. Whilst a longer period brings a higher fee.
“The number of weeks you select before receiving payments also alters what you'll pay, with some policies offering up to 13 weeks (about 3 months).” Money Hub
3. Mortgage protection is a subset of income protection
What sets it apart is that it does not have an offset clause. This means that even if you are already covered by ACC or income protection, you will still receive your mortgage cover payments if you are unable to work.
When you set up a mortgage protection plan, you have the flexibility to choose how quickly you want the coverage to start, like 4 weeks, 8 weeks, or 12 weeks. You can also decide how long you want the coverage to continue, ranging from 3 months to the end of the cover term. To learn more, check out our article What Insurance Do I Need When I Buy A Home.
Got some unanswered questions?
For a friendly, no-obligation chat to see how we can help you, contact your local adviser here.
Was this article helpful? You may want to check out: How Does Mortgage Influence Your Insurance Choices?