Homeowner: What personal insurance may you need?

Whether you’re considering buying a home or you already own one, this article is for you.

An appropriate insurance plan can help you protect your ability to repay the mortgage – and with it, your family’s financial future. Unsure about where to start? Here are some key insurance types to consider.

Life insurance

Many people understand the need to protect their things – like their cars, or their home. But insuring yourself is also crucial, especially if you have dependents or high levels of debt, like a mortgage.

Would your loved ones be impacted financially if something happened to you? What about their ability to meet their home loan repayments? This is where having life cover can make all the difference.

Life insurance is designed to provide a lump-sum payment in the event of your death, which can be used for any financial needs, including paying off the mortgage. It’s all about leaving your family with one less thing to think about during an already stressful time.

Income protection

Your ability to earn an income is one of your most important financial assets, as it allows you and your family to maintain your lifestyle. So, what would happen if you were suddenly unable to earn a living due to a serious illness or injury?

Income protection is designed to step in and replace a portion of your income (usually up to 75% of your gross pre-disability income) should you be unable to work for an extended period of time. The payments start after an agreed wait period (usually ranging between two weeks and 2 years) and continue for an agreed payment period (usually two years, five years, or up to retirement age), ceasing if you return to work before the end of your benefit period.

As you can imagine, this can be a financial lifesaver during difficult times, providing some all-important peace of mind.

Mortgage protection

Mortgage protection insurance is similar to income protection but is specifically tied to your mortgage payments. This type of insurance covers your mortgage repayments for a set period if you’re unable to work due to illness, injury, or sometimes redundancy.

It’s a more focused form of protection that directly ensures your most significant financial commitment – your home – is taken care of. Premiums also tend to be lower than income protection premiums, but keep in mind that the coverage is generally more limited.

Trauma insurance

Last but not least, another powerful protection tool to consider is trauma insurance, also known as critical illness cover. This is designed to provide a lump-sum amount upon diagnosis of more than 40 different serious conditions, including cancer, stroke, and heart attacks, as specified in your insurance policy.

Importantly, unlike income protection, you don’t have to be off work to receive the claim payment if you meet the definition of the illness within your policy. And you and your family can spend this sum however you like – for example to pay a bit off your mortgage or other debts, or to replace some income in order to put your job on hold for a while through your recovery. It’s entirely up to you.