Mortgage Insurance: why you better have it once you have a mortgage in New Zealand
Mortgage Insurance New Zealand definition:
“Mortgage insurance policy pays the person insured an agreed amount of money (the benefit) specified by the policy after a nominated waiting period for 2 years, 5 years or up to the age of 65. The waiting and benefit period of time can be specifically taylored for client’s circumstances. Amount of money is paid to the client’s bank account. Policy can be triggered by an accident or an illness which makes the person insured temporarily disabled”.
Once you have a mortgage the bank is not really your friend any more. I remember the days when Global Financial Crisis arrived to New Zealand putting many people at stress, stress often means sickness and for some of them it also ment significant financial problems. Mortgage insurance is designed to pay your mortgage payments in the event you cannot work due to sickness or an accident and even pays on the top of ACC payments if you eligible to any.
In my opinion Mortgage Insurance is even better to compare to Income Protection in New Zealand. Simply due to the following facts:
Mortgage insurance pays on the top of ACC payments or as many people say Mortgage Insurance is not offset by ACC payments.
Mortgage Insurance is available for people whose income fluctuates.
You can have a mortgage insurance even if you do not have a mortgage (that’s right) there are companies in New Zealand who would be happy to provide a mortgage cover where in fact you are simply paying for rent.
Mortgage insurance is available to self-employed people and it can be seen as a substitute to an income protection insurance in New Zealand.
You can have Mortgage Insurance if you have a rental property
In many cases mortgage insurance underwriting is simpler to compare to income insurance underwriting. The only documents you have to provide to the best suited insurance company in New Zealand are:
- Home loan statement showing the amount you pay monthly
- Outstanding home loan amount
- Application form
Mortgage Insurance policies from different insurance companies vary and some of them offer as much as 160% of cover for your home loan payment others only offer 110%. For instance – your monthly mortgage payment is $2000 – some companies would only allow to insure 110% ($2,200) while AMP 160% making it $3,200
Mortgage Insurance policies are not created equal some companies offer pretty simple and very cheap cover while others offer an array of benefits. For instance, AMP Home Loan cover is very affordable (if not the cheapest) and many New Zealanders have it only due that particular reason. To compare to Fidelity Life Mortgage Protector which offers specified injury benefit making it a Rolls-Royce of mortgage insurance policies.
All premiums in provided tables are based on 13 weeks of waiting period with benefit period up to the age of 65 years old. The premiums are for information and comparison purposes only.
Fidelity Life Mortgage Protector pays on the top of ACC benefit. Example: You broke your arm and ACC New Zealand pays to you 80% of your pre-disability income PLUS your Mortgage Insurance is going to pay to you a monthly benefit or as it is specified in the policy 30 days (see below).
Specified injury benefits for your quick reference:
- Fracture of skull, jaw 30 days
- Fracture of forearm, collarbone 30 days
- Fracture of wrist 45 days
- Fracture of upper arm, shoulder bone, elbow 60 days
- Fracture of vertebrae 60 days
- Fracture of kneecap 60 days
- Fracture of ankle, heel 60 days
- Fracture of leg below the knee (tibia or fibula) 60 days
- Fracture of leg above the knee (femur), pelvis 90 days
- Loss of thumb and index finger of the same hand 6 months
- Loss of one foot or one hand or sight in one eye 12 months
- Loss of one leg or arm 18 months
- Loss of any combination of two of the following:
- a hand, a foot, sight in one eye 24 months
- Loss of both feet or both hands or sight of both eyes 24 months
- Paralysis (Diplegia, Hemiplegia, Paraplegia, Quadriplegia) 60 months
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Hopefully you find the information useful and I would appreciate if you can share it with friends.
For your convenience the tables below show gender (pink is for ladies’ premiums and blue is for gentlemen), amount and premiums from three major insurance companies. This page is work in progress and more companies are going to be added later.
|Fidelity Life||Asteron Life||AMP|