Mortgage Protection/Repayment Insurance
Mortgage Repayment Insurance can be set up on its own, or in conjunction with other insurance cover like income protection insurance or trauma insurance. Your insurance specialist will help you to work out the best combination of cover for you.
Mortgage Repayment Insurance is designed to provide funds to meet your monthly mortgage payments should you be unable to work for a period of time due to illness or injury. An attractive feature of this product is that any other income you may receive while on claim (such as ACC) is not offset against your monthly benefit payable by the Insurer.
In most other respects it acts like income protection insurance cover.
You choose a wait period (generally 4, 8, 13 weeks), which is basically a period of time that you need to cover the mortgage payments yourself if you are unable to work due to illness or injury, before the insurance starts paying.
The insurance then pays a pre-determined (agreed value) amount of money each month, until you are better or until your benefit period expires. Your benefit period is the period that you choose – either 2 years, 5 years or until age 65.
Each different insurance cover will establish the maximum cover, but as a guide you can generally insure up to 110% of your mortgage payment. Some insurers have a maximum monthly amount that you are able to cover while other’s will simply insure your total payment.
This product can be great for a couple where if one person is unable to work then the joint mortgage payment is covered and you can generally cover the day to day living costs from the other person’s income who is still working.
For a single person or an individual (in a joint relationship) who earns the majority of the household income we would recommend that some form of Income protection policy is also taken out. After all is may not be very useful having your mortgage payments made if you are unable to pay other costs for Food, power, telephone etc..
It is important that you get advice on how to combine this insurance with other insurances to make sure that you get the right combination of cover.
All Mortgage Repayment Insurance policies are NOT created equal
Working out which Mortgage Repayment insurance to put in place is quite a complicated process.
There is a wide difference between the quality of insurance cover. Some cheap policies give you limited insurance cover – you get what you pay for.
The actual wording of the policy is different between each insurance company. The wait period and benefit period that you select will make a difference as to how the policy works for you, and to the premium that you pay.
It is important to make sure that you are getting the best value for your money, which is where our analysis and research will assist you.
How much Mortgage Repayment Insurance cover do I need?
This will depend on your personal situation. But the amount of cover that you should have will depend on a range of things, including:
- How much is your mortgage debt?
- How long can you afford to wait until the benefit starts paying you?
- What other insurance cover you have or are putting in place