Don't Risk Losing Your Home: The Importance of Personal Insurance When You Have a Mortgage
Don't Risk Losing Your Home:
The Importance of Personal Insurance When You Have a Mortgage
Purchasing a home is one of the most significant investments you will make in your lifetime. When taking out a mortgage to finance your home, it's essential to consider how you will protect your investment in the event of an unexpected circumstance. Personal insurance can provide financial security for you and your family in the face of adversity. We discuss the benefits of personal insurance with a mortgage.
What is Personal Insurance?
Personal insurance, also known as life insurance, is a contract between you and an insurance company. In exchange for a monthly or annual premium, the insurance company agrees to pay out a lump sum or regular payments to your beneficiaries upon your death, injury or illness. Personal insurance can provide financial security for your loved ones and ensure that your debts, including your mortgage, are paid off in the event of your passing, being injured or becoming ill.
The Benefits of Personal Insurance with a Mortgage:
Protection of Your Investment:
One of the primary benefits of personal insurance with a mortgage is that it protects your investment in your home. If you pass away, are injured or ill, the insurance payout can be used to pay off your mortgage, ensuring that your family is not left with the burden of your debt or without a home.
Financial Security for Your Family:
Personal insurance can provide financial security for your family in the event of your passing, becoming injured or ill. The payout can be used to cover living expenses, education costs, and other expenses that your family may face.
Peace of Mind:
Knowing that you have personal insurance with your mortgage can provide peace of mind. You can rest assured that your family will be taken care of in the event of an unexpected circumstance.
Cost-Effective:
Personal insurance can be cost-effective, especially when you consider the potential financial benefits it can provide. The cost of your premiums will depend on your age, health, and the amount of coverage you choose. Depending on your situation, part or all of the premiums may be able to be paid via super (however this does come with other complications which you should consider).
Flexibility:
Personal insurance policies are flexible and can be tailored to your specific needs. You can choose the amount of coverage you need and the length of the policy.
Types of Personal Insurance:
There are four main types of personal insurance: term life insurance and permanent life insurance.
Life Insurance:
Life insurance provides cover If you pass away during the policy term, your beneficiaries will receive the lump sum. Life insurance is often the most cost-effective option and can be an excellent choice if you only need coverage for a specific period, such as the length of your mortgage.
Total & Permanent Disability:
is a type of insurance that provides financial support to individuals who become totally and permanently disabled and are unable to work again. TPD insurance cover typically provides a lump sum payment to the insured person in the event that they suffer a disability that meets the policy's definition of total and permanent disability.
The amount of cover provided by TPD insurance can vary depending on the insurer and policy chosen by the individual. The level of cover may be determined by factors such as age, occupation, health status, and the desired level of financial protection.
To make a claim under a TPD insurance policy, the insured person typically needs to meet the policy's definition of total and permanent disability. This may involve demonstrating that they are unable to perform certain activities or work in their usual occupation due to a physical or mental impairment.
Income Protection:
Income protection cover, also known as salary continuance insurance, is a type of insurance that provides a regular income stream to an insured person if they are unable to work due to illness, injury or disability.
With income protection cover, an individual can typically receive a regular payment, usually up to 70% of their pre-disability income, for a specified period, often up to two years or until retirement age, depending on the policy terms.
The level of cover provided by income protection insurance may be influenced by factors such as age, occupation, health status, and the desired level of financial protection. Some policies may also offer additional benefits, such as rehabilitation support or a lump-sum payment in the event of a permanent disability.
To make a claim under an income protection policy, the insured person needs to demonstrate that they are unable to work due to a medical condition or injury. There may be a waiting period before the payments start, which can range from a few weeks to a few months, depending on the policy.
It is important to carefully review the terms and conditions of any income protection policy before taking out cover, to ensure that the policy provides adequate protection and meets the individual's specific needs and circumstances.
Trauma:
Trauma insurance, also known as critical illness insurance, is a type of insurance that provides a lump sum payment to the insured person if they are diagnosed with a specified critical illness or medical condition covered by the policy.
The conditions covered by trauma insurance policies can vary, but typically include major medical events such as cancer, heart attack, stroke, and kidney failure. The lump sum payment provided by the policy can be used to cover medical expenses, rehabilitation costs, or to provide financial support during a period of recovery.
The level of cover provided by trauma insurance policies can also vary depending on the insurer and policy chosen by the individual. The amount of cover may be determined by factors such as age, occupation, health status, and the desired level of financial protection.
To make a claim under a trauma insurance policy, the insured person needs to be diagnosed with a critical illness or medical condition covered by the policy. The claim process may involve providing medical evidence and documentation to support the diagnosis.
It is important to carefully review the terms and conditions of any trauma insurance policy before taking out cover, to ensure that the policy provides adequate protection and meets the individual's specific needs and circumstances.
Factors to Consider When Choosing Personal Insurance:
When choosing personal insurance, there are several factors to consider, including:
Your Age and Health:
Your age and health will play a significant role in determining the cost of your premiums. The younger and healthier you are, the lower your premiums will be.
Your Mortgage Balance:
Your mortgage balance will determine the amount of coverage you need. You'll want to ensure that your coverage is sufficient to pay off your mortgage in the event of your passing.
Your Family's Needs:
Consider your family's needs when choosing personal insurance. You'll want to ensure that your policy provides enough coverage to support your family's living expenses and future financial needs.
Your Budget:
Personal insurance premiums can vary significantly depending on the type of policy and the amount of coverage you choose. It's essential to choose a policy that fits within your budget.
Conclusion:
Personal insurance can provide financial security for you and your family in the event of an unexpected circumstance. The question we have our clients ask themselves is “If something was to happen to you, would you like your family and loved ones to be financially, worse off, the same or better off” the choice is yours.