Income protection vs mortgage protection

The two products work the same way. Both pay a monthly benefit after a waiting period when illness or injury stops you working, and both stop when you recover or the benefit period ends. The difference is what the benefit is sized against.

Income protection sizes the benefit against your earnings, usually up to about 75%. Mortgage repayment cover sizes it against your mortgage repayments, sometimes with a margin for rates and insurance. If your mortgage payment is $2,400 a month and your income is $7,000, a mortgage policy insures $2,400 and an income protection policy insures around $5,250.

That is the whole argument. The mortgage is the largest single bill, but it is not the only one. Food, power, rates, childcare, school costs and the insurance premiums themselves continue regardless, and mortgage cover does nothing for any of them.

It is not always the weaker choice. There are situations where mortgage repayment cover is the sensible answer.

• The premium for full income protection is genuinely unaffordable and the alternative is no cover at all.
• A partner’s income would cover living costs but not the mortgage as well.
• Your occupation class makes full income protection expensive but mortgage cover manageable.
• You are close to repaying the loan and only want to insure the remaining term.
• You already hold income protection with a long waiting period and want a smaller, faster-starting benefit alongside it.

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

• Whether the benefit is paid to you or directly to the lender.
• Whether the cover reduces as the loan reduces, and whether the premium reduces with it.
• Whether the policy survives a refinance or a move to another bank.
• The waiting period and benefit period, which are often shorter on mortgage cover.
• Whether ACC and other income are offset against the benefit.
• Whether the definition of disability matches what full income protection would offer for your occupation.

Every New Zealand insurer writes income protection in new zealand 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.

• Bank-sold cover is generally one insurer’s product under the bank’s brand, so it is not a market comparison.
• An adviser can size income protection so that it covers the mortgage and the rest, often for less than the combined cost of separate products.
• Where affordability is the constraint, lengthening the waiting period on full income protection often beats dropping back to mortgage-only cover.
• Cover arranged through an adviser stays with you if you change lenders, which bank-arranged cover may not.

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.