Mortgage repayment cover

Mechanically, mortgage repayment cover is income protection. You choose a waiting period, you choose a benefit period, and if illness or injury stops you working the insurer pays a monthly benefit until you recover or the benefit period ends. The only structural difference is how the benefit is sized: against your loan repayments rather than against your earnings.

Some policies allow a little more than the bare repayment — a margin for rates, house insurance and sometimes body corporate levies — on the reasonable basis that keeping a house is not just about servicing the loan. Insurers still apply an overall percentage of income cap, so a very large mortgage relative to income cannot be fully insured this way.

The appeal is price and simplicity. The limitation is that a household does not stop eating when it stops earning. Insuring the mortgage and nothing else leaves food, power, rates, childcare and every other cost uncovered, and those add up to more than the mortgage for many families.

Mortgage repayment cover is a sensible choice in a narrow set of circumstances and a poor default in most others.

• Where full income protection is genuinely unaffordable and the alternative is no cover.
• Where a partner’s income would cover living costs but could not also service the loan.
• Where the mortgage is large relative to income and the priority is simply keeping the house.
• As a short-waiting-period layer alongside income protection with a longer waiting period.

Before settling on it, price full income protection with a longer waiting period. It is common for the two to cost similar amounts, with income protection covering considerably more. That comparison is usually the whole decision, and it takes an adviser about ten minutes to produce.

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

• Whether the benefit is capped by the repayment, by a percentage of income, or by both.
• Whether rates, insurance and body corporate levies can be included in the insured amount.
• Whether the benefit or premium adjusts as the loan reduces.
• The benefit period, which on mortgage products is often two years rather than to age 65.
• How ACC and other income are offset against the benefit.
• Whether the policy survives a refinance or a change of lender.

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.

• The premium gap between mortgage repayment cover and full income protection is often smaller than expected once the waiting period is adjusted.
• Benefit periods on mortgage products are frequently shorter, which is the detail that matters in a serious claim.
• Where cover is arranged by a lender, an adviser can check whether it is assigned and whether it is portable.
• An adviser can size a single income protection policy to cover the mortgage plus living costs, which is usually a cleaner structure than two products.

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.