Advice matters
Own a home? How to protect your mortgage payments

Are you a homeowner looking at protecting your family’s home? If so, it’s likely that you have home insurance, or a combination of home and contents cover, to protect this all-important financial asset from things like natural disasters and theft.

But what about your ability to repay the mortgage? There are different types of personal insurance that can help you with that – let’s see them one by one.

Life insurance

While having life insurance is not a mandatory requirement for getting a mortgage or owning a home, it makes good financial sense, nonetheless.

If you think about it, a home is a lot more than just four walls and some furniture. It’s a place to grow a family and create memories. It’s a haven from the bustle of life. And it can also be the place you work from, or an asset you can leverage later in life.

So, what would happen if you were no longer around? Would your family be able to repay the mortgage, and if so, for how long? These are not easy questions to address – we know it well – but they’re necessary ones.

Life insurance can protect your family’s home and lifestyle, by providing your loved ones with a lump-sum payment should the unthinkable happen to you. They can then use this sum as they need, including paying off the mortgage in full.

Not quite sure how much life cover you may need? Get in touch. The appropriate amount depends on your goals and circumstances, and we can help you work that out.

Income protection

Your income – it’s your most important asset, the one that allows you to enjoy your lifestyle and work towards your financial goals. And if you’re a home owner, your ability to repay the mortgage depends on it.

With all that in mind, income protection could be a good idea if you wouldn’t be able to make the repayments without your income, or if you being out of action meant extra costs to cover.

Income protection is designed to replace part of your income if you were unable to work due to a serious illness or injury. You can tailor the cover to your budget and circumstances by selecting:

  • Replacement income amount (up to 75 per cent of your gross pre-disability income);
  • Wait period (how long after the claim you can start receiving the payments, usually ranging from one month to 13 weeks);
  • Benefit (payment period) (usually one year, two years, or until age 65 or 70). Payments stop if you return to work before the benefit period on your policy ends.

Once again, not quite sure if income protection is for you? Please don’t hesitate to contact your SHARE adviser. We’d be happy to help you understand your options. For example, if you have an emergency fund in place, you may be well-placed to choose a longer wait period and keep premiums down.

Mortgage protection

As its name suggests, mortgage protection insurance is designed to secure your ability to make mortgage payments.

Similar to income protection, it can step in if you’re unable to work due to a serious injury and illness. But rather than replacing the maximum amount of your income (which would also cover living costs), this insurance type is designed to help you keep the roof over your head. The insured amount is based on your mortgage payment, or a smaller percentage of your income if you were renting. You can tailor your cover by selecting a wait period and a payment period. Depending on the insurer, sometimes you can also add redundancy cover for an extra layer of protection.

Like to discuss your needs? Our SHARE advisers are here to help.

Trauma insurance

Lastly, trauma insurance is another powerful protection tool. It’s designed to pay out a lump-sum amount if you’re diagnosed with one of 40-plus medical conditions listed in the policy.

Also known as Critical Illness Cover and often referred to as ‘a living insurance’, trauma cover can step in regardless of whether you’re off work or not. What’s more, the lump sum can be used for whatever purposes. Some people, for example, use it to pay for experimental treatments that aren’t subsidised, or to fund a long holiday with their loved ones. And if course, some people use it for mortgage payments as well.

As a homeowner, trauma insurance is worth considering either as stand-alone cover or as an add-on to your life insurance. Get in touch with SHARE if you’d like to learn more.

Like to have a chat?

As always, our SHARE financial advisers are just a phone call away. We can talk through your options and help you understand your risk profile, as well as what strategy may be most effective. Click here to find an adviser near you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.