What to look for in mortgage cover

Almost every New Zealand mortgage comes with an insurance conversation attached, and the phrase used is “mortgage protection”. It is not a defined product. It is a label applied to at least three different contracts, and the first job is establishing which one is in front of you.

A monthly disability benefit sized to your repayments is income protection with a mortgage label, and the same offset rules and waiting periods apply. A reducing lump sum falls with the loan balance and pays on death or, depending on the benefit, on trauma or TPD. A redundancy benefit is a separate, short and heavily conditioned add-on.

They are not interchangeable, and a household that believes it bought the third and actually bought the first is in for a bad surprise.

1. 1Decide what you are protecting. If the goal is that your family keeps the house and keeps living, the cover has to outlast the debt, not track it down to zero.
2. 2Choose level over reducing where you can afford it. Reducing cover is cheaper because it shrinks. Level cover sized to the original loan leaves a surplus that pays for the years after the funeral. If the budget only stretches to reducing cover, take it deliberately rather than by default.
3. 3Own the policy. Ask who the policy owner is and who receives the money. Cover assigned to a lender clears a debt and hands your family nothing else.
4. 4Check portability. A policy you own continues regardless of who holds your mortgage. Cover arranged around a specific loan may reduce, be assigned, or end on refinance — and refinancing is precisely when nobody is thinking about their insurance.
5. 5Insure the income, not just the debt. Being unable to work for six months is far likelier than dying, and it defaults a mortgage just as effectively. Compare waiting periods, benefit periods and the ACC offset clause on any monthly benefit.
6. 6Do not buy under time pressure. An offer made mid-settlement, when you have already answered a hundred questions, is not one you should decide on that day. Take the wording away.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether the sum insured reduces automatically with the loan balance, and whether you chose that.
• Whether the policy ends or is assigned if you refinance elsewhere.
• Whether a redundancy component excludes self-employment, fixed-term contracts and probationary periods.
• Whether a monthly benefit offsets ACC, other insurance and employer payments.
• Whether the cover is underwritten at application or assessed at claim.
• Whether the term of the cover matches the term of the loan and the family’s need, whichever is longer.

Every New Zealand insurer writes mortgage cover to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• An adviser identifies which of the three products you are actually being offered, which the sales conversation often leaves unclear.
• An adviser prices level against reducing so you can see what the surplus costs rather than defaulting to the cheaper number.
• Where cover is tied to a loan, an adviser arranges portable cover you own.
• An adviser structures ownership and beneficiary nominations so the money reaches the household, not just the bank.
• An adviser reviews the cover when the mortgage changes, which is when lender-arranged cover usually stops matching the need.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.