Is your home protected if your household income drops?
House prices have been on the rise for a number of years and with that rise can come bigger mortgages. It is not uncommon for a two salary income couple with children to have up to a million dollars in debt on their mortgage.While managing increased debt, Covid-19 has added a wave of uncertainty around our economy and employment market. There is now a very real risk of families losing income and small business suffering as a result.
When the economy is going well and everyone in the family is healthy, working to pay of your debt is manageable. But what would happen to your home and lifestyle if you were to become ill, injured or if you were made redundant? All of a sudden your family will be down to a single income or none at all, yet will still have the same level of debt to pay, as well as other family expenses.
Do I really need Mortgage Protection Insurance?
Often people think they will be able to make it through such an event without insurance, due to; having some savings, selling their home or relying on their parent’s help. But are you sure this backstop would work and have you really thought it through?Common reasons people think they will manage without Mortgage Protection Insurance;
1. "I have a nest egg of savings of around $20K that I can fall back on."
If you were to have a serious accident, as an example, $20k would only see you through several months of household expenses, rather than the years you may need to recover and recuperate and then you will have no "plan B", as you will have used it all.
2. "I am happy to sell my home and down size."
While you might be comfortable downsizing your home, you may also be having to experience a serious illness such as cancer at the same time. Do you really want to have the added stress of getting your home ready for sale, rushing it through the process and potentially having to settle for less than what it is worth, all the while trying to manage chemotherapy treatments and doctor’s visits? Also, selling a house is a costly exercise, so that is an expensive "insurance plan".
3. "I can rely on my parent’s help."
Your parents may have some funds for you to use or borrow in order to get through a job redundancy, but what happens when your parents wish to retire? Will you need to pay them back and/or rob them of the retirement that they have dreamed of and saved hard for?
Wouldn’t you rather keep your savings aside for a family holiday, spend your precious time with your loved ones and remain comfortable in your home? Get smart advice, go to www.clickcover.co.nz or call the team on 0800 clickcover
What is Mortgage Protection Insurance?
Mortgage Protection Insurance covers your mortgage repayments and some income if you can not work due to an illness, accident or redundancy.How does it work and what is a “wait period”?
An agreed amount is paid to you on a monthly basis to cover your monthly mortgage repayments, eg, $4,000. Your Mortgage Protection Insurance payments will start after a “wait period” is over. There is usually a minimum wait of one month or you can have a longer wait period depending on your situation. Usually the longer the wait period you choose, the cheaper your insurance premiums will be. However, when you are deciding on a wait period, it’s important that you consider how long you and your family can get by without either one or no income. If you do decide to go for a longer wait period, it’s crucial that you have some form of savings or emergency fund to access during this time.How much should I have?
In terms of a ballpark figure, Mortgage Protection Insurance is usually restricted to 115% of your current mortgage repayments or an agreed value up to 45% of your gross income. It’s important to talk to an expert Registered Financial Adviser who will recommend exactly how much cover you will need to comfortably meet your mortgage repayments and for any other debt that you may have. An adviser will take into account all of your other circumstances including a partner's income.How much does it cost?
The price of your Mortgage Protection Cover premium is dependent on a variety of things, such as; your age, occupation, medical history, whether or not you are a smoker or engage in any hazardous activities and the amount of cover you take and the wait period.How long does it last for?
You can choose to have cover for 2 years, 5 years, until you turn age 65 or until you turn age 70. The payment term you choose means that your mortgage payments will be taken care of up to a maximum of your chosen payment term.With thousands of options in the market and degrees of quality, it is vital you get the best advice.
Get unbiased advice and get covered all from the comfort of your home, at www.clickcover.co.nz