Mortgage Protection Insurance

Learn Answers to questions about protecting your mortgage

For most of us, a mortgage is the biggest financial commitment we will ever make in our lives.  In the event of something happening to you, such as illness or redundancy and you are unable to bring in your regular salary, Mortgage Protection Insurance will cover the cost of your regular monthly mortgage repayments.  Mortgage Protection Insurance is insures the borrower, if they cannot pay. This is different to Lenders Mortgage Insurance (LMI), which protects the lender.

Do I have to purchase Mortgage Protection Insurance?

It is not compulsory, but many people purchase the policy because it is valuable peace of mind.  They know they will be able to keep up with the loan repayments if they lose their job or contract a serious illness that prevents them from working.  If the policy holder dies, dependents will receive the payments.

Government assisted repayments for sick and injured. These benefits often have a waiting period of several months before payments kick in.  Mortgage Protection Insurance will handle repayments during the waiting period.

If you were out of work for six months, could you pay your monthly mortgage payments? Could you meet all your other financial costs (bills, food etc.)? This is where mortgage protection insurance is valuable.

How much does a Mortgage Protection Insurance policy cost?

There are numerous insurance products for different circumstances.  There is no one size fits all.  Monthly premiums vary, but can start out at just a few dollars for a basic policy.  There are several factors that impact the cost of the policy, such as the size of the mortgage loan, the age of the policyholder, the size of the monthly mortgage repayments, marital status, whether you have been or are a smoker, your current health, family medical history and profession.

How much cover do I need?

 Ideally, you want to cover the current outstanding balance of your mortgage, for the remaining term of the mortgage.  For a new mortgage, you need to cover the entire amount you are borrowing over the term of the mortgage.

 Do I need to take out Mortgage Protection Insurance with my mortgage lender?

Absolutely not.  You are free to shop around.  This is where you can benefit from independent advice, such as that provided by the team of specialists at iMortgage Broker Brisbane.  They will provide you with the best available product, which could save you money.

Which mortgage protection policy is the right one for me?

This will depended on many things.  Selecting the right insurance protection policy is not an easy decision. Because it concerns the most important thing in your life, the security of your family.  When you are comparing policies, keep in mind the following:

  • Look at the benefit pay out amount and make sure it can pay all the expenses related to your mortgage, including interest.
  • Do you have dependents, such as children and/or aging parents?  How long are they likely to be dependent on you?  This will help you to determine the level of cover you need.
  • Check the waiting period on the policy. Make sure you pick a policy that pays out sooner rather than later.

What are the benefits of Mortgage Protection Insurance?

  • Although you may never get to draw on the policy, it is peace of mind knowing that you will be able to keep up with mortgage repayments.
  • High acceptance rates.
  • A straightforward application process.
  • The policy covers permanent and temporary disablement, loss of job and death.
  • The estate’s beneficiaries receive a payment, if the policy holder passes away.
  • Discounts for joint policies taken with your partner.

 

How long does a mortgage protection benefit last?

This varies from one insurance provider to another, but most policies tend to pay out for up to 12 months.

How do I pay for Mortgage Protection Insurance?

Payments are made monthly via direct debit.  There could be a higher charge if paying by debit or credit card.

What can affect my ability to get Mortgage Protection Insurance?

The exclusions of mortgage protection will differ with each insurance provider.  If you have a pre-existing serious health condition, this could affect your ability to get coverage. Or you will pay a higher premium due to the extra risk.

Before applying, study the policy to see which circumstances are excluded.

How are successful claims paid?

Claims are paid into your nominated account. Or your monthly mortgage repayment account.

What happens if I stop paying my insurance premiums?

You should always keep up to date with payments for your mortgage protection policy, otherwise it would be in danger of lapsing.  If this happens, and you subsequently lose your job or cannot work through illness or injury, it may not pay out.  If you are experiencing financial difficulties, you should talk to your lender as soon as you possibly can.

Who can I turn to for impartial advice about Mortgage Protection Insurance?

It is really important to get advice before taking out any insurance policy.  The experts at iMortgage Broker Brisbane can offer you independent, impartial advice on the best solutions for your personal circumstances.  To speak to a broker, call us on 07 3062 8446.  We will be happy to answer any questions you may have.