As a homeowner, your largest monthly expense is usually the mortgage payment, so keeping up with the repayments could be a struggle for your family if they had to do it alone without you.
A study by Massey University for the Financial Services Council found that more than half of households would have a drop in consumption of over 40% if the main earner died, yet in New Zealand, we have the third-lowest uptake of life and trauma insurance of 31 OECD countries.
It was also recognised that women, even those who were the main breadwinner - were less aware than men of the need to have life insurance to protect their families financially if they or their partner died.
Sorted, the Commission for Financial Capability's personal finance site, describes homes as our biggest commitment while we have a mortgage, and our biggest asset once the mortgage is paid off.
They also urge kiwis to protect their homes from the unexpected by considering life insurance and mortgage repayment insurance, as well as house and contents insurance.
Protecting your familyWhen you get a mortgage, the only kind of insurance you're usually required to take out is to cover the house itself. That will protect you if the house is damaged, but it won't do anything to ensure you'd be able to stay in the house if anything happened to you.
Life insurance gives your family a lump sum payment to make sure you can continue paying mortgage repayments if the worst happened and you or your partner were no longer there to care for your family.
Most people choose to insure all outstanding mortgage debt, but some have less cover because they want to cut the costs of premiums or because they believe their surviving partner could cover the rest of the mortgage through salary or savings.
You might also want life insurance to cover other expenses, including:
- your children's education, including school fees, school uniforms and perhaps university tuition fees
- debts from credit cards, personal loans or hire purchase agreements
- day-to-day living expenses for things like groceries, clothing, utility bills and recreational activities
- funeral expenses
It also pays to review your life insurance if you already have a property and you're increasing the size of your mortgage.
Make it easyThere's a lot to think about when you buy a house, so we understand checking out life insurance can sometimes slip to the bottom of the priority list.
For an easy, hassle-free way to shop around for life insurance, LifeDirect offers a way to compare New Zealand's leading insurers and is independent, transparent and free. If you're unsure how to factor the cost of the mortgage into the amount of cover you should take out, you can start a free quote online and start comparing prices.
We offer an online application which is fast, secure and takes most people only 10-20 minutes to complete. Once you have your life insurance sorted, you'll have the peace of mind that comes from knowing you're doing right by your family.