Mortgage protection insurance is group of insurance policies designed to take care of your mortgage when something unexpected happens to you.
Mortgage Protection is an insurance taken out on the mortgage borrower (you, the person who is responsible for repaying the mortgage).
If the borrower for some reason cannot meet their obligations of paying the mortgage to the bank, the mortgage protection policy will take care of those obligations.
So what things can go wrong….
- Death by sickness or accident. You may die unexpectedly and if this were to happen the bank would need the mortgage repaid. This would mean your family or partner would have to sell the house to repay the debt. A common misconception is that the bank would let someone else take over the mortgage, this is not true, once someone dies all debts must be repaid from the persons estate. Obviously a stressful situation to be in and one that can easily be avoided by arranging mortgage protection insurance. A mortgage protection insurance policy would pay out a lump sum of money, which can be used towards paying off the mortgage and free yourself from the bank.
- Unable to work. You (the borrower) can become disabled due to sickness, injury or accident, preventing you from working, and if you are not working your employer will eventually stop paying you. Research has proven that most New Zealand families could only survive for 4 – 6 weeks if they have no income. If you are disabled by a disease or a long term sickness, such as cancer or maybe a nasty virus, the chances are, no matter how much you want, you will not be able to work. This means no pay and no money, so you are likely to get behind on your mortgage payments. Anyone who thinks they can rely on WINZ (Work and Income New Zealand) for enough money from a benefit to pay the mortgage and live is badly mistaken, if your partner is working you won’t get any benefit, and even if you are single the benefit is very small. So just imagine you are really sick and you cannot work, and you have no money, the bank will only be friendly for so long before they will start putting you under pressure to make mortgage payments. If you cannot come up with the money the bank has the right to sell your house, this is called a mortgagee sale. Even if you have some disease or illness that stops you from getting out bed, your once friendly bank will still demand that the mortgage is paid. If you can’t make the payments they will still sell off your house, believe me it has happened to people before, and will continue to happen. Mortgage Protection Insurance would prevent this from happening as the insurance company would begin to pay you money every month so you can make your mortgage payment (after the insurance wait period, 4, 8 or 13 weeks), and would continue to pay this money every month until you reach your benefit period (2 years, 5 years or to age 65) or until you are able to return to work again. This means there is no chance of the bank selling your house due to you being unable to work.
Why would you risk loosing your house because you do not have Mortgage Protection Insurance.
How much is Mortgage Protection Insurance ?
Go to our website page on Mortgage Protection Insurance for further information and you can enter a few easy details to get quotes from all of the insurance companies that we use.
Article by Andrew Ball of Ease Insurance: 3 July 2013