Helping your clients protect their property

While home buyers borrowing more than 80 per cent of the property’s value will have to pay the lender’s mortgage insurance to protect the lender if the home buyer is unable to repay their mortgage, there also options available to the home buyer to ensure that they will be able to continue repaying the mortgage in the event that something goes wrong. Here we look at some of the options available.

Whenever a client takes out a mortgage, they should look to help protect their mortgage payments should they be unable to repay. The first obvious option is taking out life insurance. Life insurance will mean that if the main breadwinner in the family dies unexpectedly, the family will be protected. The life insurance policy should provide enough to not only repay any outstanding mortgage payments owed on the property; it should also cover ongoing expenses such as schooling for children and the everyday costs of living. Life insurance can help protect any surviving family members from losing the family home. If clients are refinancing, or borrowing against the equity in the property, they will also need to look at increasing their life insurance policies accordingly.

Income protection is also vital for providing peace of mind for anyone making mortgage repayments. Income protection, also known as salary continuance, provides an ongoing income of up to 75 per cent of the insured’s monthly salary in the event that the insured cannot work due to illness or injury. Income protection can help ensure that if a breadwinner within the family becomes sick or is injured and unable to work, they will be able to continue to meet their mortgage repayments.

Trauma and crisis insurance can also help maintain repayments on a mortgage. Crisis cover for example can provide a lump sum benefit if the insured person suffers a life threatening illness or debilitating health condition. These conditions will be specified in the policy and can change from policy to policy but will generally include, stroke, cancer, heart attack and other serious illness. This lump sum benefit can be used to continue making mortgage repayments while the insured person remains unable to work.

It may be a good idea to ask your clients to speak to their financial planner, or to seek financial advice when they refinance their mortgage, take out a new mortgage, or borrow against the equity in their property.

Of course, it’s also important for your clients to ensure that the property itself is adequately insured. If the property is destroyed by fire for example, they will need sufficient funds to be able to rebuild.

These are just some of the options available to anyone who is repaying a mortgage. The right type and level of cover will differ for each individual situation and therefore you should always encourage your clients to seek professional financial advice so that they remain fully protected. It’s also important to remind them that they should be reviewing their insurance whenever their situation changes.