Your home loan is the biggest financial commitment you’ll ever make and taking the time to ensure you can always meet your repayments – no matter what – is very important to your future financial security, your lifestyle and your family too! In this article we take a look at mortgage protection insurance to see if it could be the right option for you.
Your mortgage is a commitment that won’t wait for anything – you always need to make those repayments no matter what happens. The consequences of not being able to meet your repayments can be quite severe, including the bank foreclosing on your home loan and selling your property to recoup the debt.
Mortgage protection insurance – sometimes called loan protection insurance – is a policy that you can take out in order to protect your capacity to make your mortgage repayments. Policies can usually be arranged to cover your mortgage repayments in the event you lose your job, or suffer a serious illness, injury or even death.
How is mortgage protection insurance different to LMI?
Mortgage protection insurance is very different from Lenders Mortgage Insurance (LMI). LMI is designed to cover your lender (the institute providing your loan) – not you. In the event that you cannot make your repayments and the lender needs to foreclose on your loan, LMI covers the lender for any losses they may make when the property is eventually sold. Even though your lender may require you to take out LMI as a condition of granting your loan, it is important to note that LMI does not cover you if you cannot make your home loan repayments for any reason.
Do I really need mortgage protection insurance? Is it just another expense?
It is important that you think about how you would meet your loan repayments if something should go wrong. Some people have income protection insurance that covers their income in the event they cannot work for a while or lose their job. This is fine as long as it will be enough to cover both your living expenses as well as your loan repayments – but it doesn’t necessarily cover serious illnesses, permanent disability or death.
Others may have a life insurance policy which could pay out a lump sum in the event of death or permanent injury or disability. However, life insurance policies do not cover you for eventualities like unemployment or less serious illnesses.
It is important that you have insurance cover for every eventuality. And it’s also important to make sure that you’re not under-insured. We recommend that you give yourself an insurance health check to be sure that any insurance you have will be enough to cover your loan repayments and other expenses, no matter what happens.
We can help you to assess whether or not your existing insurance is enough to cover your loan repayments as well as your living expenses. This is not only important in terms of making your home loan repayments, it could be very important to the well-being of your family as well.
It is also important to note that in some instances, mortgage protection insurance may be tax deductible, particularly if you’re taking it out for an investment property. You should check with your accountant to see if you can claim mortgage protection insurance as a tax deductible expense.
How do I organise cover?
Talking about your financial situation and commitments is part of the process we undertake when helping you to apply for a home loan, so going one step further to help you assess your insurance requirements at the same time is easy. We have a reliable, cost-effective insurance partner, so we can also help you to organise an affordable mortgage protection insurance policy if you need one.
Simply discuss your situation with us and we will organise a free quote that is tailored to your requirements, or refer you to one of our partners.
Remember, as your mortgage broker, we’re here to help you get the home loan that’s right for your requirements and suited to your personal financial situation. Making sure you have adequate insurance cover for your needs at the same time you take out your home loan is part of our service. We genuinely care about your financial future and your well-being, so please don’t hesitate to talk to us about your insurance requirements today.