Our homes are an integral part of our lives. It’s the place where we spend a lot of our spare time
relaxing, where we raise our families, host friends and escape from the world outside. And for many
of us, it’s also our greatest financial asset. The minute we buy a house and take out a loan, we make a significant and long-term financial commitment to repay the dreaded ‘m’ word – a mortgage.
Mortgage repayments are normally our largest expense and as banks have tightened up following the recession, they’re not the kind of payments we can afford to miss. So what happens if you or the main breadwinner in your family gets ill or has an accident? How will you cover your mortgage payments and continue to take care of all the other household expenses like bills and food?
If you think it won’t happen to you, think again. According to a recent Massey University study, the primary income earner in 14,980 New Zealand households will fall seriously ill at some stage in their lives and be unable to work for six months or more. Consequently over half of these households would be unable to pay all their expenses and maintain their lifestyle within a month after sick leave and annual leave ran out.
While some insurance advisers are advocates for income protection insurance, mortgage protection insurance can provide you with the financial security you need, at a much more affordable price. Simply put, mortgage protection insurance is designed to pay your mortgage when you’re unable to work due to accident or illness.
Unlike income protection insurance, mortgage protection insurance is not offset by ACC. This is a real benefit as it means if you have an accident, you’ll still get your full ACC entitlement as well as the cover from your mortgage protection policy. Therefore this makes it a good option for employed people, as opposed to income protection, to enable them to maximise their entitlement in the event of an accident.
Another key benefit is that you can cover mortgage payments on your main residence or on an investment property and if you don’t have a mortgage, you can still have some cover based upon your earnings (which makes it fantastic if you are a renter). You can also include redundancy cover or elect to have a standalone redundancy insurance policy.
As with all insurances, what you need depends on your personal circumstances. If you are a homeowner with children or an employee, then I believe you should seriously consider having mortgage protection insurance to protect your home.
A free disclosure statement is available on request.
Foresight Financial Planning received HighlyCommended in the New Business Excellence category in the Taranaki Business Awards 2013.