You just never know what’s around the corner…you might be made redundant, you or your partner could become ill, or have an accident – or worse. Meanwhile, there’s your home – the bank still expects those monthly home loan payments to be made, even if you’re not earning an income.
However, this isn’t all about doom and gloom – it’s about reassurance. Home loan protection is a simple and cost-effective way to ensure you have peace of mind.
Mortgage: Insurance vs. Protection
You may vaguely have heard the term ‘Lenders Mortgage Insurance’ (LMI) mentioned when you were arranging to buy your home, and so you’re asking yourself – ‘do I already have it’? To answer this, we need to define the difference between LMI and what Mortgage Protection.
Mortgage Insurance is usually taken out with home loans where the deposit paid is less than 20% of the mortgage amount. Home loan providers insure themselves – so that they will still get paid, even if you default on your repayments.
Mortgage Protection is cover that supports you, the borrower – and not the lender. Mortgage Protection is offered in a number of different ways: Full Cover (Life and Disability, with Involuntary Unemployment benefit), Mortgage Cover only (Life) and Repayment Cover only (Disability with Involuntary Unemployment benefit).
Of course, should the worst occur, Life Insurance would also cover the mortgage. The most popular type of life insurance in Australia is ‘term life insurance’, which will provide your family with a lump sum in the event of death or terminal illness. It can be taken out by anyone between the age of 17 and 69 and renewed until the policy anniversary date before their 99th birthday.
Life insurance also helps to protect other commitments, including education costs, other loan repayments and simply meeting your family’s ongoing income needs on a daily basis.
What type of insurance do you need?
If you don’t have either of these insurances at the moment, it is a good idea to think about putting something in place to offer you peace of mind about your mortgage. We hope you never need to worry about this but with the right insurance cover, it needn’t be a worry.