DOES BUYING A HOUSE REQUIRE LIFE INSURANCE?

 

Buying a house is one of the most exciting things you do in your life. As it is most likely the biggest investment you make in a lifetime, it can be quite thrilling ,lets see how.

There are a number of factors to consider like where you want to live, what you can afford - you may also want to meet a mortgage broker or a bank to assist you with your borrowing capacity. Among making these important decisions, at this time, it is also essential that you think about having some protection in place which can help cover your mortgage in case you are unable to continue your repayments.

IS LIFE INSURANCE NEEDED WHEN BUYING A HOUSE?

Investing in property is a crucial financial responsibility and an ongoing commitment. Even though it is not a requirement when buying a house, life insurance plays a significant role in securing your family's future.

 

According to the Australian Bureau of Statistics, the average mortgage repayments in Sydney are calculated at $2,167 per month, whereas monthly repyments in Melbourne can be $1,820. It is important that in the event of an accident or illness that prevents you from going to work, you have a policy in place that can assist you with your debts and daily living expenses. Income Protection provides the monthly payments of upto 75% of your monthly income that can cover such expenses. A life cover would provide your family with a lump sum benefit in case you pass away, allowing them to take care of financial responsibilities without the added stress in their time of grief.
Having a life insurance policy can give you and your family the peace of mind that if the unexpected occurs, you will have the monetary assistance to cover your house loans and other costs associated with owning property.

WHEN IS THE BEST TIME TO GET AN INSURANCE COVER WHEN MOVING INTO A NEW HOME?

The search for a new home is a busy time and can be emotionally taxing. It may seem tempting to delay the added work of finding the right insurance policy until after you're settled into your new home and all arrangements have been finalised. However, even though you may not have moved into your new house yet, you are still financially responsible for it and must think about financial protection.
If you already have an insurance policy, this can be an important time to review your policy and make sure you are covered for the extra debt you're taking on. It is also worthwhile to look at what you're covered for, the benefit period, waiting period and the sum insured under your cover. Your financial adviser can assist you in reviewing and updating your existing insurance, or help you find the right one to cover your needs. If you don't have a financial adviser, click here to get in touch with us today.

 

IS LIFE INSURANCE THE SAME AS LENDERS' MORTGAGE INSURANCE?

Have you heard of lenders' mortgage insurance (LMI) and wondered if it is any different from life insurance? Yes, it is. Where LMI protects lenders, life isnurance protects the individuals insured under the policy.
When taking out a loan, generally people must pay a deposit of 20% of the house's purchase price in order to avoid paying the LMI. If your deposit is less than 20% or you are not qualified for the First Home Loan Deposit Scheme by the federal government, your LMI payments can be soemwhere between $2,500 to $10,000. Unlike life insurance, LMI is designed to protect the lender and not you and your family. So, if you default on your loan or the unpaid value of the mortgage does not equal the selling price of your property, your lender can make a claim for the LMI policy to cover the shortfall.
LMI and life insurance are two very different insurances designed for two very different purposes, and it's not uncommon to take out both.

 

WANT TO KNOW MORE?

If you would like to discuss the contents of this article, please call us at 02 8015 5507 or email us at info@angelicinsurance.com.au Please note that at Angelic Insurance, we can only provide you with general information, and do not consider your personal objectives and financial situation. You should consider whether the advice is suitable for you before making the final decision.