Who likes paying for insurance?
The reality is none of us really enjoy paying for insurance, but most of us understand the value of having some insurance cover just in case something goes wrong.
When you get a mortgage you are often committing to making regular financial commitments for anything up to 30-years and yet you have no idea what will happen over that time.
Maybe you should be asking yourself the following questions;
- What would happen if you fell ill and were unable to work for 6-months?
- What would happen if you had an accident or a medical condition that meant you could never work again?
- What would happen if you or your spouse was diagnosed with a serious cancer, or if one of you died tomorrow?
These are some serious questions, but they are things that do happen to some people and in many cases they are not able to cope financially when they do.
Having the right mortgage protection cover will not stop these things happening, but it will take away that financial impact and make it easier for everyone to make the right decisions.
Getting The Right Mortgage Protection Cover
Most people will not shop around for the right mortgage protection cover and will instead take out a policy with the bank that does their mortgage.
In most cases this means you will have an ‘okay’ mortgage cover, but generally not the best cover available and almost certainly you will not be getting real value for money.
In New Zealand there are a number of insurance companies all offering different cover and at a different cost. The issue then becomes how to know the differences and it can also take a lot of time to then get quotes from all the companies.
What Is Mortgage Protection Insurance?
Under the guise of mortgage protection insurance the banks often sell just life cover as this makes the insurance seem cheaper.
We generally recommend that you have a proper Mortgage Protection Cover which includes both;
- Life Cover – to pay the mortgage off should either of you die
- Repayment Cover – to pay the mortgage repayments should either of you be unable to work.
You are much more likely to have an event that leads to being unable to work for an extended period of time, than actually dying. For many families being without an income for ‘say’ 6-months will lead to serious financial issues and potentially lead to having to sell the family home.
Not All Mortgage Cover Is The Same
An insurance policy is really a “promise” to financially compensate you should an unexpected event happen which causes a financial loss.
In the case of life insurance the policies are all very similar and if you have life cover for ‘say’ $500,000 then your estate will receive that amount should you die.
When you consider mortgage repayment cover there is a lot more to consider.
We would generally use a ‘wait period’ of 13-weeks for the repayment cover as this is the most cost effective option, and you should be able to get a 13-week mortgage repayment holiday (the bank’s maximum) should it be needed. Also we suggest an agreed value, meaning you do not have to prove a loss and it is not offset against any other benefits or income.
When you take out an insurance policy you also want to know that the company would be able to meet any claims – the financial stability.
Some of the best insurance brokers use external research to help them make recommendations and ultimately ensure that you get the right mortgage protection cover. This information can be supplied to you in a report which rates the various policies based on the policy wording (the contract) and the financial stability of the insurance company.
The Cheapest Mortgage Protection Cover
When you buy any product price is important but the main priority should be to get the right cover – that is cover that will pay out when needed.
While we do not suggest that you always go for the cheapest, there is no point paying too much either. With insurance it is a matter of getting the right mortgage protection at a fair price and for that reason we provide you with quotes from a range of the leading insurance companies so that you can see both the quality of the policy and the cost.
It is always interesting to compare prices on insurance policies.
In the case shown here the monthly cost of the insurance between the cheapest and dearest is $64.31 a month ($267.40 – $203.09) which equates to $771.72 per year. Our clients actually chose the policy costing $204.27 monthly as this had a better policy definition for the mortgage repayment cover, but was still one of the cheapest policies.
It’s Free To Review Your Existing Insurance
Everyone should review their insurances each year but most don’t as they really do not want to be “sold” any more insurance or even go through that discussion again. A discussion about insurance is generally quite negative, talking about death and disablement.
Unfortunately these events can impact our lives and we probably all know people that have had experiences where a better insurance policy would have meant a better outcome for them and/or their families.
Whether you just want to know that you have the best mortgage cover in place, or know that you are paying a fair price for your mortgage protection cover – it is worth contacting us for a free insurance review.
