How to calculate your mortgage protection cover

Mortgage protection is a category name rather than a single product. Under it sit two quite different things. Mortgage repayment cover is a form of income protection sized to your loan repayments: it pays monthly while you cannot work. Life cover taken for the mortgage pays a lump sum on death that clears the debt outright.

Both matter and they solve different problems. A lump sum does nothing if you are alive but unable to work, which is the more likely event. A monthly benefit does nothing for a family whose earner has died and who now face a mortgage with one income permanently gone.

The calculation below runs both, because the honest answer for most households with a mortgage and dependants is that they need some of each, sized to what they can afford to hold.

Sizing the monthly repayment cover

1. 1Take your actual monthly mortgage repayment, at your current rate. Not the interest-only figure, the full repayment.
2. 2Add rates, house insurance and body corporate levies if you want the house to be fully carried by the benefit.
3. 3Decide whether the benefit needs to cover living costs too, or whether a separate income protection policy is doing that. Doubling up is a common and expensive error.
4. 4Check the insurer’s cap. Mortgage repayment cover is normally limited to a proportion of your income as well as to your repayment, so the loan does not set the ceiling on its own.
5. 5Choose a waiting period you can bridge from sick leave and savings, and a benefit period that matches how long the loan runs.

Sizing the lump sum life cover

1. 1Take the current loan balance, not the original loan.
2. 2Add any fixed-rate break cost that would be triggered by early repayment, if you would repay rather than keep the loan running.
3. 3Add a buffer for rates, insurance and maintenance for a year, so the survivor is not selling under pressure.
4. 4Subtract any existing life cover already earmarked for the mortgage.

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

• Whether the policy pays a benefit sized to the repayment or a percentage of income, whichever is lower.
• Whether the benefit reduces as the loan reduces, and whether the premium reduces with it.
• Whether the bank is the owner or beneficiary of the policy, which changes who controls the money.
• Whether redundancy cover is included, what it excludes, and how long it actually pays for.
• Whether you already hold income protection that covers the same repayment, so you are paying twice.
• What happens to the cover if you refinance to another lender or sell the house.

Every New Zealand insurer writes mortgage protection insurance 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 will check whether existing income protection already carries the mortgage, which often saves a whole premium.
• They can size life cover to the loan and structure ownership so the money reaches the survivor quickly.
• They compare disability definitions, which differ more in this product than in almost any other.
• They can tell you when the bank’s product is genuinely competitive, because sometimes it is.

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.