Mortgage Protection

Basics of Mortgage Protection Plans

  • Families that have opted for mortgages understand the importance of paying mortgage repayments to the financer in time and often worry about not being able to make these repayments every month. Insurers in Australia are constantly working hard to come out with new products to offer financial security to people and now insurers offer Mortgage policies to ensure that families do not lose their homes in case they are disabled and cannot pay these repayments on time. Mortgage protection plans also protect families if they become involuntarily unemployed and need funds to repay mortgages.
  • People, who opt for this financial product, will receive a lump sum payment when they cannot pay the mortgages on time due to health reasons or being involuntarily unemployed. Alternately, the insurer may decide to give the lender who has provided the mortgage the lump sum payment in order to settle the debt the policy holder has taken.
  • Usually insurers offer this financial product to people who have invested in a residential property to be used either as a primary home or as an investment property. Commercial properties are usually not covered by this type of financial product unless specified by the insurer. Insurers may give the policy holder to take out the policy either in the name of your company or in your own name.

 Types of Mortgage Protection Plans

  • Like all financial products, insurers in Australia offer various levels of cover to suit the needs of people with different budgets. Basic plans include Term Life Insurance and Total Permanent Disability Insurance where as comprehensive plans include Term Life Cover, TPD insurance and Income Insurance as well. The comprehensive plans offer maximum compensation and financial stability but are subject to certain terms of the insurer.
  • Buyers can choose to purchase either one or two bundles of these plans if they are between the ages of 20 – 59 years and have a current home. These bundled plans can be purchased at any time as long as you own the mortgaged property; however a few insurers will only offer you mortgage protection if you have refinanced your mortgage in the last 3 months.
  • Both short term and long term policies are offered to potential buyers. The length of the offered plans can range from 5 years to until your mortgage is valid. This type of protection plan will be valid until the mortgage is active; the term of the policy isn’t over and provided you have paid all the required premiums on time. This being said, there is no lock in period for these plans which implies that for any reason if the buyer chooses to cancel the policy then he can do so, however some insurers may charge a small penalty.

 What Does Mortgage Protection Cover?

  • Life – If your policy is active when you pass away due to natural causes or due to an accident then the insurer will repay the mortgage amount in full. This ensures that your family doesn’t have t worry about settling the mortgage debt when they are already suffering and grieving the loss of a loved one.
  • Disability – You can also get the benefits of the policy, if you are ill or injured significantly due to which you are disabled. The amount the insurer decides to give to the lender will depend on the type of policy and how many months or years you cannot work.
  • Involuntary unemployment – If you lose your job due to any reason and you cannot pay the repayments to the lender, then for a limited time that is specified by the insurer, your mortgages will be paid for.
  • Trauma – If you are diagnosed with a life threatening disease then the insurer may provide an additional payment that may range from $10,000 to $50,000.

Why Purchase Mortgage Protection Plans?

  • You should purchase this type of insurance plan if you want financial protection in case you are ill, disabled or temporarily unemployed since these plans offer a guarantee that your mortgages will be paid on time after you file a successful claim with the insurer.
  • You should purchase these plans if you have either young dependant or elderly parents and grandparents who rely on you for financial protection. Mortgage policies can prevent young children from facing trauma when their families are evicted from their houses due to financial reasons. These policies can prevent elderly parents from feeling helpless when they and their family are asked to leave the house they worked so hard to build together. These plans can ensure that your family is financially protected and your house remains a safe haven for them even while you are not there to protect them or while you are unable to protect them due to illness or disability. This type of insurance is also a must for people with unemployed spouses, pets or any other type of dependants.

 Conclusion

  • In a nutshell it can be said that mortgage policies, cover mortgage repayments and repayments only.
  • You can purchase plans that either include TPD and Term Life Insurance or plans that include TPD, Term life insurance and Income Insurance covers.
  • The length of the contract can range from 5 years to until the mortgage is valid; however buyers can back out of the contract at any time provided they inform the insurer in advance.
  • You can enjoy the benefits of this type of protection plan if you are disabled, diagnosed with a serious illness or are unemployed involuntarily. Your family will receive financial aid in the form of a mortgage settlement if you pass away while the policy is active.

 

Important information

Mortgage protection plans work differently than income protection plans, TPD plans, term life cover plans and trauma insurance plans. Mortgage covers, offered by insurers in Australia only offer repayments for existing mortgages; these plans do not offer a lump sum payment or monthly payments to the policy holder and his family for household expenses or other purposes.

 

 


  Income Protection Life Insurance