Mortgage Protection Insurance

Mortgage protection insurance can pay your mortgage and home if something goes wrong. But that's true of other insurances such as income protection and death cover. So, is mortgage protection cover really worth it?

What is mortgage protection insurance?

Mortgage protection insurance is a type of life insurance that is designed to protect one very specific but important asset: your home. Sometimes referred to as mortgage life insurance, mortgage protection insurance can cover you, the borrower, in case you can't pay your loan. It can pay the cost of regular monthly mortgage repayments if you die, become seriously ill or in some circumstances, lose your job.

Not to be confused with lenders mortgage insurance (a type of insurance that lenders can take out if they think a borrower is high risk), mortgage protection insurance covers the borrower, not the lender.

Mortgage protection insurance: Pros and cons

Compare mortgage protection insurance in Australia

We only found 2 insurance companies in Australia that still offer mortgage protection insurance:

Brands	Trauma benefit	Death and Terminal Illness Benefit	Specified Injury Benefit	Minimum age	Maximum age
Aussie My Protection Plan	Yes	$10,000	Up to $7,500	18	59
Mortgage Choice Mortgage Protection Insurance	Yes	$10,000	Up to $7,500	18	59

Compare income protection policies to help protect your mortgage

Income protection could be a good alternative to mortgage protection as it pays a monthly benefit to replace lost income if you become sick or injured. These monthly benefits can help you manage your regular mortgage payments if you're unable to work so you can focus on recovery.

Income protection calculator: How much cover you could get

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Name	Product	Maximum Monthly Benefit	Maximum % of Income Covered	Maximum Benefit Period	Average Claims Acceptance Rate	Average Claim Time	Sum Insured	Apply
TAL Accelerated Protection Income Protection Finder Award		$30,000	Up to 70%	Up to Age 65	Data not available	1.3 months	$1,305 million	Get quote View details	Get up to 70% of your income covered with flexible short and long term benefit periods.	Compare	loading Fetching your data...
AAMI Income Protection		$10,000	Up to 75%	Up to 5 years	Data not available	2.8 months	$222 million	Get Quote View details	Compare	loading Fetching your data...
NobleOak Income Protection Finder Award		$30,000	Up to 70%	Up to Age 65	97%	Data not available	$65 million	Get Quote View details	Get one month free for a limited time - apply by 21 December 2023. With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.	Compare	loading Fetching your data...
Medibank Income Protection		$12,500	Up to 70%	Up to 5 years	Data not available	Data not available	Data not available	Get Quote View details	If you’re a Medibank health member, you can enjoy a 10% discount on your premiums each year.	Compare	loading Fetching your data...
ahm Income Protection		$10,000	Up to 70%	Up to 5 years	Data not available	Data not available	Data not available	Get Quote View details	Compare	loading Fetching your data...
Insuranceline Income Protection		$10,000	Up to 75%	Up to 5 years	95.70%	2.8 months	$222 million	Get Quote View details	Take out a new Insuranceline Income Protection policy and get a $100 eGift card after your first 4 months of cover. T&Cs apply. Ends 31 March 2024.	Compare	loading Fetching your data...

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What does mortgage protection cover?

Mortgage protection insurance can cover mortgage repayments for the following:

• Disability. If you suffer temporary disablement, permanent disablement and are unable to work.
• Loss of job. If you are made redundant but not if you simply quit your job (many policies do not offer this benefit, so check beforehand).
• Death. If you pass away, mortgage protection will continue to pay your mortgage repayments, so that your family doesn't have to.

Keep in mind that most policies exclude any pre-existing condition prior to purchasing mortgage insurance protection. So if you receive a medical consultation for any ailment or condition in the 12 months before you purchase the policy, and that medical condition leads to a claim after the policy commences, you won't be covered.

You also won't be covered if you work part-time, casual, contract, or in a temporary capacity for less than 20 hours per week. This is generally also the case if you are self employed and work less than 20 hours per week.

Is mortgage protection insurance worth it?

Mortgage protection insurance only covers your mortgage. As you know, your mortgage is simply a part of your day-to-day expenses, albeit a significant portion of it. This means if you were forced to stop work and made a successful claim, you would still have other bills to pay, such as:

• School tuition fees. If you have children, you will need to continue paying their fees.
• Other loans. Whether it's a car loan, or a student loan, many of us are paying off more than just our home loan at some point in our lives.
• Living expenses. With mortgage protection insurance, you'll still need to find money to pay for essentials like food, energy bills and transport costs.

If you have these expenses covered already, then mortgage protection insurance might be worth it for you. If you don't want to eat into your savings though, income protection is probably the more financially viable option.

What insurance can I get instead of mortgage protection insurance?

Mortgage protection insurance is a type of life insurance. However, it's not necessarily the most comprehensive life insurance option. Here are some others worth considering, all of which can help with mortgage repayments.

• Income protection. Income protection is designed to replace your income by up to 85% should you become sick or injured. To get covered, you'll need to pay a monthly fee and get peace of mind knowing you're covered for all your expenses, not just the mortgage, if something stops you from working. If you die, many policies will pay your entire benefit in one lump sum, helping your loved ones pay off the mortgage.
• Life insurance. Death cover, more commonly just referred to as life insurance, pays out a lump sum of money when you die. This money goes to the people you nominate on your policy, so could easily help pay off your mortgage.
• Total and permanent disability (TPD). This is often included with death cover, and provides you with a lump sum for permanent loss of work due to serious illness or injury. This lump sum payment can go towards mortgage repayments as well as other day-to-day expenses.

What to look for when doing a mortgage protection insurance comparison

Mortgage protection is looking after the most important thing in your life – your family's security, so here's how to find the most reputable insurer, the most inclusive policy and the best benefits for your needs.

• Coverage. Look at what the benefit payout amount is designed to cover and make sure it can pay all of the expenses related to your mortgage including your interest and repayments. It is also a good time to consider how much coverage you should take out to be truly protected.
• Waiting period. If something happens to the main income earner of the family there will be enough emotional turmoil in the house without adding financial problems, so make sure that your benefit will pay out as soon as possible so your family isn't put under financial stress.
• Your dependents. Consider whether you have children, or even ageing parents, who depend on you, and how long they are likely to be dependent for. This will help you decide on the level and the term of cover.
• Other income. You may be able to look at lower levels of cover if your family has other sources of income, such as investments, or assets that could be sold. At the same time you don't want your family to sell assets to pay the mortgage and then be left without any other assets – and where does the money come from when there's nothing left to sell?
• Your risk factors. The costs of mortgage protection can vary depending on your health and lifestyle factors, so you may need to seek out a specialised insurer who has experience in catering to your needs.
• The provider. As well as insurers who specialise in certain health and lifestyle factors, when comparing insurers make sure you choose an established and well-respected company, and one that is friendly and easy to deal with.

Why you can trust Finder's income protection experts

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Frequently asked questions

• What types of properties can mortgage protection cover?

  Mortgage protection can be taken out on both residential and commercial properties. The policyholder can either live in the property or hold it as an investment.

• Is mortgage protection insurance the same as Payment Protection Insurance (PPI?)

  Mortgage protection insurance does work in a similar way to PPI in that it will ensure an outstanding loan is repaid in the event that the policyholder passes away. Mortgage protection insurance is generally offered as a standalone policy by life insurance providers and is designed specifically for repayment of the policyholder's mortgage in the event of their death.

• Is mortgage protection insurance tax deductible?

  Generally, the premiums payable for mortgage protection are not tax-deductible as the payment is not an expense in gaining assessable income. Benefit payments are not assessable for income tax purposes. Learn more about life insurance and tax.

• Is mortgage protection the same as lenders mortgage insurance (LMI)?

  No. Lender's mortgage insurance (LMI) is a type of insurance that lenders can take out to protect themselves if they believe a borrower is high risk e.g. likely to stop paying their home loan. The premiums for an LMI policy get added to the borrower's loan amount.

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Level of Protection UnsureNone$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000$1,000,000$1,250,000$1,500,000$1,750,000$2,000,000

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