Mortgage Repayment Insurance
The benefits of having mortgage repayment insurance are well worth the premium charged to have such comprehensive cover.
This type of insurance solution is very simple when in comes to assessing how much you get paid at claim time, because there are no other offsets if you are being paid ACC or any other benefit for the same disability.
Unlike income protection cover, mortgage repayment insurance is generally not measured by the amount of income you earn, but rather how much your mortgage repayment is.
The monthly benefit is generally not assessed as taxable income, but as always, you may want to clarify this with your taxation professional.
How does mortgage insurance work
Once your cover is in place, you are eligible to claim if you are unable to work for more than 10 hours per week. It is a simple definition when it comes to claiming.
It is important to keep in mind that if your policy was issued with any special terms and conditions you will need to take those into consideration.
There are a few factors that determine premiums which are Gender, Occupation, Smoking Status, Wait Period, Benefit period and of course how much you are insuring for.
Understanding most of these factors is easy enough to do, but the Wait and Benefit Periods may need a little explanation.
Wait Period
A wait period is how long you are prepared to wait before you start receiving your insured benefit. The longer you are prepared to wait, the cheaper it will make your premium.
A word of caution is that it is tempting to take a longer wait period of 13 weeks or longer because that does make your premium much cheaper, but you need to be realistic about how long you can wait.
Benefit Period
A benefit period is how long you need your mortgage repayment benefit paid. You could have up to 2 years or even up to age 65. Again, be realistic around what you need and what you can afford. It is no use having mortgage repayment insurance if you cannot pay the premiums.
The fine print
As with every insurance product, there is policy wording and you should have a good broad understanding of what you are covered for and when a claim could be made.
The value of a Registered Financial Adviser is that they usually have access to multiple mortgage insurers and an in depth understanding of a wide range of options for you.
If you have an old mortgage repayment policy you may want to get that reviewed, because there has been a lot of innovation and enhancements for modern insurance cover.
If you need advice or want to review your existing cover, please contact us.
