Mortgage Protection Explained
Taking out a mortgage is one of the biggest financial commitments of our lives. The thought of being unable to make mortgage repayments due to being unable to work as a result of a serious injury. Mortgage repayment insurance can ensure your family is never placed in a compromising financial position by covering your mortgage repayments in the event of serious illness or death.
What Exactly is Mortgage Protection Insurance?
- Mortgage protection pays an ongoing monthly benefit if the policyholder is to suffer a covered disability or passes away.
- Mortgage Insurance ensures the policyholder keeps on top of their mortgage repayments if they are forced out of work due to illness or injury.
- In the event that the policyholder passes away, mortgage protection ensures that their repayments remain covered.
Additional Benefits of Mortgage Protection Insurance
There are a number of additional benefits that may be available on your mortgage protection policy. Some options that are worth considering include.
- Redundancy Cover: Some Mortgage Protection plans will provide cover if the insured is made redundant.
- Free Accidental Death Cover: Some policies will offer accidental death cover for a defined period.
- Disability Benefit: Monthly benefit paid if insured is unable to make repayments due to disability.
- Death Benefit: Lump sum benefit paid if insured passes away.
- No Medical Underwriting Required: There is generally no medical underwriting required to take out Mortgage Protection Insurance.
Mortgage Protection Insurance Unemployment Benefit: Does Mortgage Redundancy Protection Insurance Exist?
There are mortgage protection policies available in Australia that will provide a portion of the monthly benefit payment to help cover mortgage repayments in the event that the insured becomes involuntarily unemployed.
Mortgage Protection Insurance Involuntary Redundancy Conditions
Many people are quick to get excited over the prospect of having cover in place in the event that they lose their job. However, this cover option does come with a range of conditions for payment that applicants should be clear on.
- Policyholder has become unemployed for reasons outside of their control. It must not be their own choice or anything to do with their own performance in the company
- Policyholder has registered with an approved employment agency and is actively seeking work
- There will be a limit on the benefit payable on this policy. As an example, ANZ will provide 1/30th of the monthly repayment to a maximum of $7,500
- If the policyholder suffers another loss covered under the policy i.e. disability benefit, only one benefit will be paid
- There will be a maximum period of time that the benefit can be paid. This is usually about 90 days
- Policy premium will continue to be paid during waiting period and while under claim
It is crucial that anyone considering this additional option considers the requirements for the redundancy benefit to be paid and if there are more suitable ways to be financially prepared in the event that they become unemployed. Conditions will vary from policy to policy so it is crucial to review the PDS prior to application.
Lifetime Commitment Covered with Mortgage Protection Insurance
Paying off your house mortgage is a lifetime commitment. That’s why it is essential that you always have a back-up plan you can turn to when worst comes to worst. And the best way to do that is through mortgage protection insurance.
So what is Mortgage Protection Insurance? Mortgage protection is a type of insurance coverage a homeowner can buy as a surety that—in the event that they lose their job or they are otherwise unable to continue paying their mortgage—their mortgage will still be paid.
Mortgage Protection insurance, it should be noted, can be purchased as a life insurance add-on feature. This is the best way most insurance providers can provide comprehensive cover for your life, home, and income.
The unemployment rate in Australia was last reported at 5.2 percent in December of 2011. Labour force data from the Australian Bureau of Statistics showed the economy shed more than 29,000 jobs in December. If you are willing to protect yourself (and your family, and your home) from a possible job loss, then you should consider buying some form of mortgage protection.
Mortgage protection can give you a considerable amount of cover for your home. But to guard against coverage gaps, homeowners should include a job-loss rider. A job-loss rider prevents your home from falling under foreclosure and will allow you to keep your home while you look for a job.
Factors that May Affect Mortgage Insurance Costs
Insurance providers will bring several factors into consideration when calculating how much premium you have to pay for your mortgage protection insurance. Some of these factors are:
The possibility of unemployment.
Look at the overall trend in the job industry you belong in. If your employer, your industry, or your local area has been cutting jobs left and right, that could mean that you have less security where you are at right now than other jobs. The job market has a significant deciding factor on your mortgage protection premium. The higher the risk that you may lose your job, the more your mortgage protection insurance may cost.
The price of your mortgage payments.
If, at the moment, you are making modest mortgage payments, your mortgage protection insurance could possibly be significantly more affordable than a homeowner who lives in a million-dollar home. The more affordable your mortgage, the more willing your insurance provider will offer your inexpensive mortgage protection the coverage you need.
The recession that is affecting most economies around the world today also plays a big role in determining the cost of the premiums you are going to pay. If projections show that the job market and the economy are going to worsen in the near future, that, too, will affect your mortgage protection costs. As the risk goes up for insurance providers, so do the costs to policyholders.
Getting Mortgage Protection Insurance
If you choose to purchase mortgage income protection insurance, it can protect you from losing the house you have lovingly built, just because of an unstable economy. With an added job-loss rider, mortgage protection will help pay your mortgage payments in the event that you lose your job and can also cover your mortgage if you are otherwise unable to continue the payments on your own. If you are seeking a more flexible type of cover then income protection insurance might be more suited to you.