First-home buyer? Why personal insurance is a good idea

Ready to start your home ownership journey? Congratulations – you’ve worked hard to get on the property ladder, and now you can finally start creating memories in your new home.

But as you know, buying property is also a long-term financial commitment, one that’s worth protecting from as many angles as possible. So here are some key things to think about.

Life is full of the unexpected

If you have a mortgage, you already have some level of cover. Home insurance is a mandatory requirement for a home loan, and it’s designed to safeguard your dwelling by covering the cost of repairs or rebuilds if the house gets damaged.

But if you think about it, natural disasters or theft aren’t the only curveballs that you may be served. Your ability to pay the mortgage is equally important.

So, what about personal insurance? Unlike insurance on your house, personal insurance is not compulsory for homeowners – but in most cases, it’s still a (very) good idea. And depending on your needs, you have different options to choose from.

Ever heard of mortgage protection?

As the name clearly conveys, mortgage protection insurance is designed to take care of your mortgage repayments for a while, if you’re unable to work due to illness or injury.

Most insurers allow you to cover up to 110% or 115% of your mortgage payments, after a wait period and for an agreed payment period (or until you’re able to return to work, whichever is first).

Have you thought about life insurance?

Looking for more comprehensive cover? Life insurance is a common option among homeowners – and with good reason.

It provides your loved ones with much-needed financial support if you’re no longer around, and unlike mortgage protection, your family can spend the lump-sum payout as they wish. They may use part of it to pay off the mortgage, and the rest for other short-term needs and long-term goals (e.g., tertiary education, housekeeping costs, etc.)

Depending on the level of cover you choose, life insurance can help your family keep a roof over their head and maintain their lifestyle.

What would happen if you could no longer work?

No one likes to think about being unable to work for an extended period, due to an illness or accident. But unfortunately, it’s something we have little control over. What we can do is mitigate its financial impact, just in case.

As a homeowner, protecting your ability to earn a living is key, and this is where income protection comes in. Put simply, it’s designed to replace up to 75% of your gross income if you’re unable to work due to a serious illness or injury.

It’s up to you to choose the payment period, the wait period, and the percentage of income you’d like to cover. Having enough money for the essentials, including your mortgage repayments, means you don’t have to tap into your savings, change your lifestyle, or take on debt to stay afloat.

What if you fell critically ill, but could still work?

Another option to consider is trauma insurance (or critical illness cover). Unlike income protection, you don’t have to be off work to receive the payout. A powerful tool, trauma insurance provides a lump-sum amount upon diagnosis of more than 40 different serious conditions, including cancer, stroke, and heart attacks.

Most importantly, trauma insurance gives you and your family the flexibility to spend the payment however you like. You can use it to pay off debt, put your job on hold for a while, afford some quality time with the family, and much more. It’s entirely up to you.

Need help navigating your options?

Your home is more than just four walls and a roof – it’s a huge part of your family’s financial security. That’s why it’s important to have a protection plan in place, one that takes care of your biggest risks.

Unsure what policy is for you? Feel free to seek help. An insurance adviser can talk you through the options and benefits, and tailor a protection plan for your needs, so you can be confident in your choice. Click here to find a financial adviser specialised in Personal Risk near you today.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.