Taking Out Life Insurance to Cover Your Mortgage

Don't Pass On Mortgage Debt to Those That Mean Most To You - Find Cover For Your Mortgage

Life insurance is one of those things none of us likes to think about but that we all know is a necessary expense. Its purpose is simple: to help your family cope financially in the event that death or serious illness strikes.

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Without life insurance cover in place, life’s unexpected emergencies can have a devastating financial impact on those you love. How would your family survive if you died unexpectedly? Would they be able to cope with unpaid debts and the ongoing bills? Would your kids’ education still be affordable?

Life insurance, in its many forms, is designed to ensure you don’t have to worry about questions like these, which is why it makes sense to take out life insurance to cover your mortgage. If the unexpected happens and your family is suddenly without your regular stream of income, you can rest safe in the knowledge that they’ll have the insurance cover they need to be able to continue making mortgage payments and avoid having to sell your family home.

Choosing a Life Insurance Policy to Cover Your Mortgage

There are three types of cover to choose from when selecting a life insurance policy to cover your mortgage:

Life Insurance

This type of insurance is often referred to as term life insurance, life cover or death cover. Under this type of policy, your beneficiaries will receive a lump sum payment in the event of your death or if you are diagnosed with a terminal illness.

Term life insurance is ideal for high-risk times in your life, especially when you’ve got a large amount left to pay off your mortgage. Premiums for this cover increase as you age, and also increase in line with the Consumer Price Index.

A death cover benefit payment can ensure that your home does not need to be sold even if you’re not around or unable to earn an income. However, take into consideration that payment under this type of policy is in the form of a lump sum. Depending on the structure of your mortgage, you may not be allowed to make extra repayments to get out of debt quicker. As a result, you will have to budget how you are planning to spend the benefit over a set period of time to ensure you have enough funds to make regular mortgage repayments.

Mortgage Protection Insurance

The panel of insurance advisers finder.com.au works with are unable to provide quotes for Mortgage Protection Insurance. There are only a select number of general insurance companies in Australia that still offer this type of cover.
You may like to receive a quote for Income Protection Insurance

Mortgage protection insurance is actually a simplified form of life insurance. This type of cover can be taken out on residential or commercial properties and is designed to ensure that your mortgage repayments will be covered in the event that anything happens to you.

Your beneficiaries will receive benefit payments to help cover mortgage repayments. When you take out mortgage insurance you will usually be taking it out for the full amount of the mortgage, at the beginning of the term. In the past, if you made a claim insurers would only pay out the remaining balance of your mortgage. However, some insurers will now pay you the full amount of your mortgage even if you’ve already paid off a substantial amount. Other insurers will allow you to adjust your mortgage protection cover into a life insurance policy as your mortgage commitment decreases.

Some mortgage protection insurance policies will also provide involuntary redundancy cover, providing financial protection in the event that the insured is made redundant.

Income Protection

Income protection cover kicks in if illness or injury keeps you out of work for an extended period of time. It is designed to offer a replacement income, generally up to 75 per cent of your regular income, until you get back on your feet. This monthly benefit payment allows you to simply concentrate on your recovery rather than worry about coping with bills and other expenses.

With a steady monthly income still coming in, you’ll be able to look after your mortgage repayments. You can choose the benefit period and waiting period that work best for you, based on things like your income and savings. Keep in mind that the longer the benefit period and the shorter the waiting period you choose will, of course, result in higher premiums.

Unlike many other types of personal insurance, one key benefit of income protection is that your premiums are tax deductible. Income protection also provides a choice between agreed value or indemnity protection to suit your occupation and income.

Life Insurance for Mortgage Application

Insurance providers will assess a number of factors when you apply for life insurance for mortgage protection. During the underwriting process, when insurers ascertain the degree of risk presented by insuring a particular person, they will take several issues into consideration.

Some of the factors that can influence your life insurance for mortgage protection application will include your age, your medical history and current health conditions, your lifestyle (for example smoking), and the nature of your occupation.

However, compared to applying for life insurance, which can often be a lengthy process involving medical examinations, applying for mortgage protection cover is actually relatively straightforward. There are usually no medical check-ups to endure or lengthy questionnaires to complete, and the whole process is entirely stress-free.

Some insurers offer discounts off your premium if you take out a joint policy, while flexible payment options can help make this type of cover more affordable and easy to manage on your budget.

Find Life Insurance to Cover Your Mortgage

If you are looking to take out protective cover for your mortgage in the event that something were to happen to you, its critical that you take the time to assess your situation to determine what type of cover is most suitable. It may be worth speaking with an insurance consultant about the different types of cover available to you.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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Product details Maximum cover Maximum Entry Age Cooling-off
(days)
Life Insurance
Life Insurance
Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application. $1,500,000 65 30 Get quoteMore info
Term Life Insurance
Term Life Insurance
Receive up to $1,500,000 in life cover with American Express Term Life Insurance issues by Zurich. $1,000,000 69 30 Get quoteMore info
NobleOak Term Life Insurance
NobleOak Term Life Insurance
Save 25% on NobleOak life insurance and pay no premium in the first month. $15,000,000 69 30 Get quoteMore info
Life Insurance
Life Insurance
Get flexible life insurance up to the sum of $2,000,000. $2,000,000 59 21 Get quoteMore info
Ezicover Life Insurance
Ezicover Life Insurance
Get up to $1.5 million in life cover. 10% discount available on a second life insurance policy when two policies are issued at the same time. $1,500,000 69 30 Get quoteMore info

William Eve

Will is a personal finance writer for finder.com.au specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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