Insurance can be expensive and we can all think of better things to do with our money … until something goes wrong and we need to rely on our insurance.
House & Contents Insurance
House insurance policies now work on a “sum assured” basis meaning that it is up to you as the home owner to set the dollar value of your house – which is the maximum the insurer will pay should your house be destroyed.
Houses are not often totally destroyed, but it can happen. In New Zealand we are vulnerable to some natural disasters (earthquake, volcanic activity and floods) which can cause a total of a house, and the next most common cause is fire. While insurance companies now use the “sum assured” house insurance policies, there is at least one company that includes full replacement for fire.
If you have a house that is rented you need to have a specific insurance cover for the house.
Mortgage Protection Insurance
Mortgage protection insurance is designed to pay off your mortgage should a borrower die or become terminally ill, and the more comprehensive policies will also have a repayment cover should a borrower be unable to work and therefore earn an income.
Like many types of insurances, there are a lot of differences to the mortgage cover offered by the various banks and insurance companies.
A mortgage protection policy may include;
Life Cover – this pays out the agreed sum should you die. It is important to have enough cover and also to have the policy ownership correct. You should also makes sure that your will is up to date as any life insurance pay-out may form part of your estate.
Terminal Illness Cover – in New Zealand most of the life insurance policies include terminal illness cover which means if you are diagnosed with a terminal illness whereby you are unlikely to survive for 12-months then the life cover is paid out early.
Trauma Cover – there are various levels of trauma cover that cover anything from the critical specified conditions such as cancer, heart attack and stroke to more comprehensive policies that cover more than forty specified conditions.
Repayment / Income Cover – these policies either pay your mortgage repayments or compensate you for the lost income should you be unable to work. This is probably the most important insurance cover to have in place as should you be unable to earn then you will find it difficult to continue to pay your mortgage repayments which ultimately may lead to you having to sell your home. The banks and insurance companies that offer mortgage repayment and income protection insurances have also created various policy options and it is important to get a policy that suits your situation so at claim time you have no problems with getting paid.
Review Your Insurances
Don’t bury your head in the sand and “hope” for the best – many people regret the “she’ll be right” approach, but by then it is too late.
It is important to ensure that you have the right types of cover, the appropriate levels of cover and also make sure that the cost of the insurance fits within your budget.
With most types of life insurance as you get older the cover gets more expensive and therefore the challenge is to retain the cover that you need while not paying too much.
Getting “cheap insurance” should not be the aim.
Making sure that you get a good level of cover at a reasonable cost is what most people will strive for. When trimming insurance costs you need to be careful not to reduce the levels of cover beyond what is required. As mortgage advisers, too often we see people in financial trouble after finding that the insurance cover proved not to be the cover they thought they had.
Having the right types of insurance and levels of cover is too important to ignore and you should make it a priority to discuss this with us.
Contact an adviser who can help you assess your insurance needs, provide quotes from the various insurance companies and implement the cover that you require.