Mortgage protection insurance is a flexible, low cost way to make sure you don't lose your home, even if the worst happens. The purpose of mortgage protection is to ensure that if you were unable to work due to illness of injury, you could still pay your mortgage. For most people, a mortgage insurance package is made up of life insurance and mortgage protection.
Life insuranceThe way life insurance works is simple, if the worst was to happen to you, your insurance company will pay out a lump sum payment if you suddenly die, or are terminally ill (which means that you have 12 months or fewer to live).
You can insure any sum you'd like - you can match your mortgage, or add extra cover, for example to take care of debt or provide a replacement income for family.
Life insurance covers any cause of death - e.g. sickness, accident, etc. The only standard "exclusion" is for suicide within the first 13 months of setting up the policy.
Mortgage protection insuranceLike life insurance, mortgage protection is pretty straightforward. You choose an amount to protect (usually to match your ongoing repayments), a "wait period", and a "payment period". If you become injured or ill and can't work, once your wait period has finished, your insurer will make monthly claim payments. These continue until you're able to return to work or until the end of your payment period, whichever is first.
Insurers have some exclusions (such as suicide within the first 12 months), but aside from these, any health issue that keeps you off work is covered. Mortgage protection insurance protects you if you can't work for health reasons. You can add cover for redundancy with some insurers, however this is usually not part of standard mortgage protection.
If mortgage protection is something you'd like to look into, you can start a quote online and compare from New Zealand's leading insurers, or give our Wellington based team a call on 0800 800 400 for a chat