Do you need cover to get a home loan?

There are two kinds of insurance in a home loan conversation and they get conflated constantly. The first is insurance over the property: a house policy protecting the building the bank is lending against. Lenders require that, and reasonably so — it protects the asset securing the loan. You can buy it from anyone, but you do have to have it.

The second is personal insurance: life cover, mortgage repayment cover, trauma or TPD. No New Zealand lender can require you to buy those from it as a condition of approval. What happens instead is that the conversation is scheduled at the moment you are most compliant, the paperwork arrives together, and nobody says explicitly that one part is optional.

The way to resolve it takes one sentence: “Is my lending approved if I decline the personal insurance?” Ask for the answer in writing. In almost every case the answer is yes, and the pressure evaporates.

1. 1Confirm in writing that the loan approval does not depend on the personal cover being taken.
2. 2Take the insurance documents away rather than signing them at the same appointment.
3. 3Ask which insurer underwrites the cover, and whether the policy would be assigned to the bank.
4. 4Have the same cover quoted across several insurers before you decide.
5. 5Make the decision on the cover in its own conversation, with your health history properly disclosed.
6. 6Put something in place before settlement if you need to, and review it properly afterwards.

If you need cover in place for settlement and the underwriting will not be finished in time, most insurers provide interim accident cover from the date of application. It is limited, but it is something, and it is a better answer than signing whatever is on the table.

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

• Whether any insurance requirement in the loan offer relates to the property or to you personally.
• Whether the personal cover offered is assigned to the lender.
• Whether declining it changes the interest rate or any other term of the lending.
• Whether the cover is tied to that specific loan and ends if you refinance.
• Whether you have been asked full health questions, since limited underwriting means more scrutiny at claim.
• Whether existing cover you already hold would do the job, before buying anything new.

Every New Zealand insurer writes mortgage 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.

• An adviser can quote several insurers against the same application, which is the comparison a lender cannot provide.
• Where cover must be in place quickly, an adviser can confirm what interim protection applies from the date of application.
• A mortgage adviser and an insurance adviser are not always the same person — knowing which you are dealing with clarifies whose product is on the table.
• Existing cover is often adequate or nearly so; a review before settlement is usually cheaper than a new policy.

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.