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Many people begrudge paying for insurance, but the peace of mind that comes from knowing you, your family and your home are protected against unforeseen events is priceless! Insurance provides protection against short term financial hardship and set-backs that could have a serious long term effect on your future financial security.

In this article, we explain the types of insurance you should think about when buying a home. If you’d like to know more, simply talk to us about your requirements, we’re here to help.

Income Protection

This type of insurance provides an income safety net should you become sick or injured and are unable to work and make your home loan repayments. You may also like to consider trauma/critical illness cover, total and permanent disability insurance and life insurance – that way if you are unable to go back to work, you won’t lose your home.

Mortgage Protection 

Mortgage Protection insurance covers the cost of your mortgage repayments if you die, or become seriously ill. It should be noted that it is only meant to cover your mortgage repayments and not any other expenses for you or your family. It may be a wise choice if you already have some other kind of life insurance – say with your super plan.

Building & Contents

Building or home insurance protects against the cost of rebuilding or repairing your home from things that are outside your control, like fire or natural disasters. You can opt for total replacement cover (to rebuild your home as it was prior to the event), or sum-insured cover (coverage up to a certain amount). When you buy a home, your mortgage broker will most likely recommend that you insure the property before settlement day.

When choosing your policy, make sure you have the right amount of coverage, as well as the right type of insurance for your actual needs. Talk to us, as we are an invaluable source of information to help you determine this.

Contents insurance protects your belongings, including carpets, rugs and curtains, in events such as fires, storms or theft. Often it will be bundled together with home insurance. Many people consider it a must-have to protect from those smaller disasters – even a contained kitchen fire could render your home unliveable until you can repair the damage!

How can your mortgage broker help?

We can access some of Australia’s most respected insurance providers, and offer you a competitive price on your insurance needs. What’s great is that we can do it all – from setting you up with a home loan that meets your financial circumstances, and also help you to arrange the right insurance to protect you and your family. You’ll find we can offer a range of options and make it easy. You may also be able to save by bundling insurances together, so please get in touch today! What insurance do you need to know about when buying a property?

Insurance

When taking out a home or investment loan, there are many insurance products that are relevant and all have a different purpose. Choosing the right cover or combination of insurance products can be very confusing. This article describes the insurance products that you may need to know about if you’re considering taking out a mortgage.

Lender’s Mortgage Insurance (LMI)
Lender’s Mortgage Insurance (LMI) is in place to protect your lender if you default on your mortgage repayments. It is usual for your lender to charge you a fee for LMI if they are lending you 80% or more of the purchase price of your property. It is a one off payment made to your lender when you set up your loan.

It should be noted that LMI does not cover you if you should have a problem repaying your loan. In the unfortunate event that you cannot make your repayments and your home is repossessed and sold, LMI covers the gap between what the property is sold for and what is still owing to your lender.

With LMI, the fee is added to the total of your loan and paid off as part of your monthly mortgage repayments. Even though LMI may help you secure a lo-doc loan or a loan with a small deposit, you will still have to meet all the statutory credit checks to ensure you can meet your mortgage repayments when you apply for your loan.

Mortgage Protection Insurance
Home buyers often confuse Mortgage Protection Insurance with LMI but it is a completely different product.

Mortgage Protection Insurance is taken out by you to protect your home in the event that you are unable to meet your mortgage repayments due to sickness, injury, unemployment or death. (LMI is designed to protect the lender.) It should be noted that Mortgage Protection Insurance only provides cover for your mortgage and if you require coverage for other expenses in case of sickness, injury, unemployment or death you should consider the other forms of insurance listed below.

Like most personal insurance products, Mortgage Protection Insurance requires you to pay a premium either annually or monthly. The size of your Mortgage Protection Insurance premium will depend on the size of your home loan and how much of it you need to cover. Cover will vary depending on the provider, so be sure to read the PDS carefully so you understand what you are covered for.

Total and permanent disability insurance (TPD) & Life insurance
Total and permanent disability insurance cover is designed to give you a financial safety net if a permanent serious injury or illness makes it impossible for you to continue to work (depending on the the definition of the policy). It usually covers the costs of rehabilitation, debt repayments and the future costs of living, but this varies according to the provider. Life insurance usually only pays an agreed lump sum in the event of your death.

TPD insurance can often be taken out as part of Life insurance cover. You may have this cover with your superannuation, or you can organise it as a separate insurance product if you don’t. Remember that Life insurance only covers you if you die, so TPD insurance should be considered as a separate issue.

Income protection insurance
Income protection insurance is usually only designed to cover you if you are temporarily unable to work. It can usually be arranged so that it covers you for up to 75% of your normal income, until such time as you’re able to return to work or for the prescribed benefit period on your policy. It can be arranged so it covers you for illness and redundancy, depending on the policy and provider.

Income protection insurance is a good idea if you don’t have money saved to act as a safety net in the event you’re out of work. It could be used to cover the costs of day to day living and your mortgage.

Landlord’s insurance 
If you purchase an investment property and want to rent it out, Landlord’s insurance can cover you for accidental or malicious damage to your property and any contents that you may have leased to your tenants for their use. It’s a great way to get peace of mind when you’re placing your most valuable asset in the hands of tenants!

Individual policies for Landlord’s insurance can vary greatly from provider to provider – in some cases it may be considered an add-on to building insurance or home insurance, so be careful to choose the product that’s right for your needs and particular circumstances.

Building insurance/home and content insurance
Building insurance is a product that you can take out if you are constructing or renovating a home, or if you wish to insure the building separately to the contents of your home. Home and contents insurance usually covers both the home and the contents.

This type of insurance product usually covers you for disasters like fire, flood, and damage caused to your home, garage and sheds due to accidents. It is designed to provide you with adequate cover in the event you need to repair or rebuild your home after an insurable event has occurred.

Policies for all these insurance products and what they cover vary a great deal from insurer to insurer. You should always read the product disclosure statement carefully before you take out any insurance product or policy, and ask questions of the provider to make sure you get the cover you need.

The various insurance cover you need will depend on your personal financial situation and the eventualities you need to cover. For more information or a referral, please get in touch today.


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