Mortgage Life Insurance

Many people don't consider mortgage life insurance until they have property and dependents or family. With life insurance, the life you're really insuring is everybody else's! It is your family that are left behind if you die. Life insurance can help protect borrowers and their families from being forced into selling their home or investment property, if they are unable to meet their mortgage repayments as a result of death or serious illness.

Most people understand life insurance, but if you're diagnosed with a critical illness, then 'crisis' or 'trauma' insurance can relieve your financial difficulties. Unlike income protection insurance, which is dependent on your inability to work, trauma cover is paid out on the diagnosis of a defined critical illness regardless of your working status.

Otherwise known as 'crisis' or 'vital' cover, trauma insurance pays out a lump sum on the diagnosis of a range of nominated life-threatening conditions - like cancer, heart attack, stroke, heart bypass surgery, paralysis, and head trauma (but not for accidental death from injury). It is also often bundled with term/life cover and is designed to pay the medical bills associated with a major illness, pay out a home mortgage, or allow the injured person to work part-time until retirement, for example.

Trauma insurance isn't Income Protection Insurance

Trauma insurance is often marketed at people who aren't working, and therefore don't have income protection insurance. Like other types of risk insurance, premiums vary with age, sex and smoking status; a 30-year-old female non-smoker can buy $250,000 of cover for about $50 a month. Unlike income protection insurance, premiums are not tax deductible, but the payout is tax-free.

Be careful to read the fine print on what your policy defines as a medical condition, such as a heart attack, for example. Policies include specific criteria on major illnesses. Things to watch out for: some policies have a narrow definition of what constitutes suffering from a particular condition. It may not be enough to have signs and symptoms of a heart attack - you may have to have certain changes in an electrocardiogram test, for example. The policy that covers the greatest range of conditions isn't necessarily the best.

What illnesses are included & what does it mean?

Together with the note above, generally the list includes heart attack, heart disease, stroke, malignant cancer, chronic kidney failure and organ transplant. In most cases trauma insurance does not cover you for an accident. The key benefit of trauma insurance is that it gives you a financial buffer so you have time to recover from an illness. If you've had heart surgery and need six months to get back to work again, it's good to know you can pay your mortgage.

Many Mortgage Brokers have relationships with Life Insurance companies and can put you in touch with a reputable supplier. As part of the service we provide at X Inc, our Mortgage Brokers are able to make life insurance cover available to their clients at the same time as applying for their loan. Your X Inc. Mortgage Broker will be able to provide you with information about the company and product they work with, together with a Product Disclosure Statement at the time you apply for your loan. The Product Disclosure Statement contains the detailed information on Loan Cover Plus and this should always be considered in deciding whether you wish to apply for the product. X Inc. Mortgage Brokers and other Mortgage Brokers offering Loan Cover Plus are doing so as the Authorised Representatives of Australian Life Insurance Distribution Pty Ltd (AFSL 226 403).

Shop Around

The life insurance market is very competitive, with many life companies vying for your business. As with any other insurance, it pays to compare.