Like most things in life, we don’t realise how important or how much we need something until it’s too late. Life insurance isn’t high on the list of proprieties when you are younger but it should be as soon as you make your first big purchase, like taking out a home loan.
If you have a home loan and you don’t have life insurance, have you considered how you or your beneficiaries will cope financially with meeting the home loan repayments as well as other expenses if something happened to you? What if you don’t have any savings or money tied up in investments?
Without life insurance you or your family could be forced to sell the property (usually at a loss due to the urgency of the sale) and their whole life could be turned upside down.
Below are several types of life insurance products available that are relevant for mortgage holders. It is up to you whether you take out just one or a few and will depend on what type of work you do and your age.
- Term-life insurance (death cover): This type of cover provides your beneficiaries by paying them a lump-sum payment in the event of your death.
- Disability insurance: If you suffer from total or permanent disability your insurance company will provide you with a cash benefit.
- Income-protection insurance: If you’re struck down with a major illness or are injured, income protection will pay you a percentage of any income lost. This is usually calculated at up to 75 percent of your gross salary at the time of the claim.
- Trauma insurance: Your insurance company may provide you with a lump sum to pay for debts if you are diagnosed with a serious medical condition. Check with your insurer for a list of conditions included in this level of insurance.
Choosing a type of life insurance is just as important as it is to compare home loans, so shop around and compare life insurance policies to find one that suits you. There are a range of independent insurance companies or financial institutions offering life insurance cover.
Also check with your superannuation company to see what options are available, some brokers and financial advisers may also be able to arrange or recommend insurance solutions for you as well.