You pay the insurer a monthly premium and the insurance kicks in to pay a percentage of your mortgage (or the whole lot) if you can’t meet repayments while you’re off work.
There are policies on the market that will pay you this benefit through to the age of retirement – alternatively you may choose to have a 2 or 5 year benefit.
The benefit will be paid after a nominated stand down period – 4, 8 or 13 weeks. It is important that you are realistic in terms of how long you would be able to manage financially before the benefit kicked in. Consider things such as sick leave, annual leave, your spouse’s earning capacity, credit limits available to you, and other family support available to you.
Things to consider when looking at protecting your mortgage payments …
- Is the benefit payable to you or to your lender?
- Does it cover you in the event of redundancy or just illness and disablement?
- Can you protect the full mortgage payments for both you and your spouse?
- Are there any specific injury benefits built into the cover – such as immediate payment if you break your wrist or leg etc?
- Understand how this protection will work in conjunction with ACC and an income protection policy.