Do you have a mortgage? Along with Income Protection and Trauma Cover, Life Insurance is one of the types of covers that are best suited to a homeowner’s needs. But how can you make sure that you have the right level of coverage? Here are some tips to get you started.
Don’t go for the bare minimum
This may seem counter-intuitive, but it’s crucial not to focus only on paying off the face value of the mortgage should you pass away. Sure, it seems logical to have Life Insurance cover for $500,000 against a $500,000 mortgage, for example, but your surviving family most likely won’t just be paying off the mortgage.
What about bills and other financial obligations, for example?
A good rule of thumb to figure out your Insurance needs is to multiply your annual salary by the number of years left until retirement (e.g. $30,000 salary per year x 25 becomes $750,000 cover, on top of mortgage costs) – but this is only a guideline and may be too much or too little for some. If you’re not sure what’s best for your situation, please don’t hesitate to contact us.
Consider the aftermath
Besides income loss, there are other costs to take into account – whether that’s clearing old debts, looking after dependents, or paying for a funeral (though some policies will include these expenses in addition to the cover amount).
Your spouse/partner should be able to rely on a lump payment that will cover not only the mortgage repayments, but allow them to settle your affairs.
Think about your assets
Don’t think you can cover both a mortgage and those necessary personal costs in your Life Insurance policy?
Take some time and consider any major assets you have – for example, business interests, property, investments – and how you can use them to offset or supplement the level of cover your family will need. Also, it’s a good idea to have a Will in place, so this is more likely to happen the way you want it.
Compare your options
There’s a myriad of Insurance options available out there, which can make finding the ones you really need a bit challenging. But that’s why we are here: to help you find the right level of coverage for your needs, goals and budget.
Rather than jumping at the first policy that comes along, step back and talk to us: we can assist you and ensure you’re choosing the best solution for your family.
At the end of the day, paying off your mortgage with your Life Insurance policy is about more than simply covering the face-value costs; it’s about taking into account the extra costs and fees that come with a passing, and preparing for the long-term loss of income.
And don’t forget – talking it through with an Insurance adviser like us is always best, for an expert take on your personal situation.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek advice from a financial adviser.