- Mortgage protection insurance covers loan repayments in certain scenarios
- It may be taken out as its own policy, or there may be cover under a broader life insurance policy
- Read the fine print before making a decision
A mortgage is a major financial commitment, which is why it’s important to consider what might happen if your circumstances suddenly change and you can no longer make your repayments.
Mortgage protection insurance is designed to reduce this risk.
It’s a type of policy that can help cover your loan repayments if you lose your job, suffer a serious illness or pass away. Having this protection in place can give you peace of mind that your family won’t be left under financial stress.
Please note mortgage protection insurance is different from lender’s mortgage insurance, which is designed to protect the lender if a borrower defaults on their loan.
What does mortgage protection insurance cover?
While policies differ between providers, mortgage protection insurance typically offers:
- Cover for your repayments if you lose your job involuntarily.
- A lump sum or repayment cover if you’re diagnosed with a critical illness or permanently disabled.
- A payout to help clear the mortgage if you pass away.
It’s important to read the fine print, as there are often conditions and exclusions. For example, pre-existing health conditions may not be covered, and job loss cover usually applies only if you’re made redundant rather than if you resign.
Do you really need mortgage protection insurance?
Maybe yes, maybe no. It isn’t a legal requirement and you might already have adequate protection through existing life, income protection or trauma insurance policies. Alternatively, you might find mortgage protection insurance provides an extra safety net that suits their circumstances.
The right choice depends on your personal situation – your job security, health, financial commitments and the amount of cover you already have in place.
Your Loan Market broker can help you understand you options.
