Why you need loan protection insurance
Accidents happen. Bad things happen to good people. Times change. When life is cruising along nicely, it can be all too easy to forget these things.
So why do most of us insure our cars, our home and contents? We insure against our medical expenses, even our pets’ medical expenses. We protect ourselves against loss, from theft, natural disasters and unexpected medical and veterinary bills, but we don’t protect the biggest expense of all – our ability to make mortgage repayments.
For many Australians, home ownership is essential to both personal and financial security – and the monthly mortgage repayment is their largest regular expense. Getting behind with even one month’s repayment can lead to a whole lot of stress and spiralling debt... get several months behind and your lender can begin legal action to take possession of your home.
Lenders have financial hardship departments borrowers can liaise with to obtain a ‘payment holiday’ or to negotiate interest only payments for a set period, and banks will only foreclose as a last resort, however the stress of being in this position is, in itself, overwhelming. If you are out of a job, have suffered an accident, are ill or have just lost a partner the stress is likely to be unimaginable. It could only be a matter of months before you might need to sell your house quickly and possibly for less than its market value, adding further to the stress load at a time you and your family can least cope with it.
Loan Protection Insurance is designed to prevent this horrific scenario happening to you and your family. Answer the following questions honestly to see if Loan Protection Insurance is something you should consider:
1. Is your household reliant on a single income?
2. If you or your partner lost your job tomorrow, how long would you be able to cover the mortgage repayments?
3. If you or your partner could not work for a period of months, even years, due to illness or injury could your household manage financially?
4. What would happen should you or your partner die? Could the remaining partner continue repaying the mortgage on their own?
5. If any of the above should occur, would your family need to sell other assets or deplete savings in order to meet loan commitments?
Are your answers worrying? Then loan protection insurance may provide peace of mind. Depending on your insurer, level of cover and reason for your claim, loan protection insurance can cover your mortgage repayments for a set period, pay out a lump sum or help repay the outstanding loan balance up to your sum insured.
The good news is that getting yourself covered is easy with ALI. There are no lengthy forms, we pay benefits to you (and not the lender) to do with what you like, and unlike many other loan protection products, if you change lenders, you’re still protected (for the life of the policy). It’s that simple.