Commonwealth Bank will cover about 12 months of mortgage repayments for homeowners if an insured immediate family member dies or is diagnosed with terminal illness.
The complimentary protection, Home Loan Compassionate Care, is the first of its kind for Australians, according to CBA.
The scheme is being provided with life insurance group AIA and is available for eligible new and existing CBA owner-occupier home loans holders.
Both homeowners who took out their mortgage directly with the bank and through a broker are considered eligible.
Those interested in being covered will not need to do anything to sign up for or activate it.
A cap of $120,000 applies for the protection of each insured person.
Angus Sullivan, CBA’s Group Executive Retail Banking Services said the bank has consulted with its own employees who have been in similar situations to eliminate pain points in the claims process.
“If something were to happen, the last thing you should have to worry about is your home loan,” he said.
Australians not prepared for the worst
A third of households would only be able to make six months of mortgage repayments if someone in their immediate family was to die or be diagnosed with terminal illness, new research from CBA shows.
And one in 10 would only be able to afford repayments for one month.
Almost half of those with a home loan said they would need financial assistance to meet their repayment obligations.
That number shot up to 55 per cent for those with kids under the age of 18.
The research also indicated that more than half of Aussie homeowners have not discussed how they would make ongoing home loan repayments with their families if they were to die or fall ill.
Nearly half of all survey participants play a role in managing their household’s mortgage, according to the research.
But a third admitted they were not familiar with all the details of their home loan. Forty per cent of women and 29 per cent of men were unaware of the specifics of their mortgage.
The research comes as separate data from Digital Finance Analytics shows that about a third of owner-occupier borrowers are falling into mortgage stress.