A monthly disablity insurance that pays your mortgage repayment when you cannot, due to a medical or accident disability.

Policies today are often hard to tell apart from income protection, other than the name and lack of offsets on most policies. This makes it ideal to add to your income protection planning to give you a stronger cover.

Mortgage protection today can be quite flexible, it can cover the whole monthly payment if one person in your household is disabled. 

An improvement over past covers, if as a couple, you are both disabled at the same time, they will pay two claims too. 

As this is part of each of your individual income protection planning, so it should.

You can typically cover 100-110% of your monthly mortgage repayments through to age 65 or 70 if you were to be disabled that long.

Agreed Value:

It is important to have an agreed value mortgage protection, just because your mortgage has reduced doesn't mean your expensing have also reduced. 

So you have paid the mortgage off faster than anticipated, this is your choice and a function of you having enough income or financial resources. 

Insurance is to protect these, so having confidence in what you are paying for is important.

ACC/Offsets What does this mean?

Something we covered in income protection in more detail, it is important that you do not have any offsets on your mortgage repayment policy as you want to have the security that if your are disabled, you will not lose the house because of a reduction in income.

Are there any Offsets?

Depending on the product provider, if you pay off your mortgage entirely the mortgage protection turns into a normal income protection policy, some do some don't change. 

Some covers do cease once you have paid your mortgage off, typically older and bank supplied coverage. 

The versions that convert are better than the ones that cease; when you pay the mortgage off your health may preclude your ability to apply for new cover. 

Having your cover disappear just when you need it is not the sort of thing you want.

Insurance always works in favour of the insurer.

Not always, with a good mortgage protection cover and an accident disability where ACC is paying weekly compensation, you will be better off as ACC pays alongside the mortgage protection coverage. 

It is not income or income replacement; it is insurance for your mortgage repayment.

If you are a business owner, and your accountant does a great job of minimising your tax exposure, you may find insuring your income difficult at the level you want. 

If you have a mortgage, we can get good long term cover at a reasonable level that will help without needing your financial accounts. 

A much easier way to get you agreed value coverage.

Ok so I’ve had a look around, and I have all of these quotes that don’t make sense to me:

This is something we often come across as different insurers use different language and advisers will give you various options. 

The most common thing you will see is different wait periods and payment terms.

Waiting periods:

A waiting period on a mortgage protection policy is how long you have to be disabled before a claim payment is paid. 

Most flavours of wait period are 4 weeks, 8 weeks, 13 weeks as well as 26 weeks, 52 weeks and 104 weeks. 

The last three we do not recommend as the reduction in premium does not warrant the extra risk you take on, as you need to make your mortgage repayments if you get behind this affects your ability to make any changes if you have to.

Payment Terms

Possibly the simplest part of mortgage protection, how long do you want your claim to be paid? This can have unintended consequences if you are choosing shorter payment terms.

Typical payment terms are: 2 years, 5 years, to age 65 and to age 70. Some insurers have shorter terms of 6 and 12 months available, and some old policies will only go to age 55 or age 60 for claims payments.

The fish hook in the nominated term policies, like 2 and 5 years, is the term relates to the maximum combined duration of the condition claimed. 

If you have a back claim, and it becomes a recurring problem, after 2 or 5 years of combined claims your policy will stop covering you. 

With the to age options, we do not have this barrier. 

This is why we will always recommend the longest term available to you. 

Your extended family may help in the short term, a month or two, but they will not necessarily help you financially if you are disabled for 20 years.

Understand budget is also a concern and having something, like a 2 or 5-year term is better than no cover at all.

Redundancy

With all standard mortgage protection policies, none of them covers job redundancy, only disability caused by an accident or illness. 

Redundancy Protection can be added, at an additional cost, and is subject to additional considerations.

Other resources

Looking for other resources on mortgage protection

Where to from here?

If any of this has raised questions about the cover you have or the need for cover, please Contact Us.

We would welcome the opportunity to clarify things for you so you have confidence the cover you have will do what you want it to.