Did you know that if you have a home loan and something bad happens to you, you could lose your home. If you can no longer afford to make the bond repayments because you get sick, become disabled, or even die, the bank could sell your property; and if that happens, where will your family live?
Life insurance, however, protects you and your family from this ever happening. But how much do you really know about life insurance and how it relates to homeowners? Indie offers some advice, and boasts a life insurance product called Indie Shield that is perfect for those with dependents and home loans.
Life insurance, unlike mortgage protection insurance, covers more than just your home loan; it is used to cover your debts so that your loved ones aren’t left with any hefty bills to pay. It also differs from building insurance which covers the house against damage from fire and natural disasters.
So, if something happens to you and you can’t continue to repay your bond, life insurance pays out a lump sum to cover the outstanding amount, so that your family can continue to live in their home.
Do you have to have life insurance as a homeowner?
Strictly speaking, you don’t, unless the bank or bond originator that’s giving you the home loan requires it. But, if you consider the risk to your family’s financial future if you don’t get covered, it’s strongly advisable that you do.
In this case, the right amount of life insurance is enough to cover your home loan if you die.
Of course, if you don’t already have life insurance to cover your other debts, you probably want to get enough cover to make allowance for that too.
Top tip: Remember to discuss your current life stage assets and responsibilities with your financial adviser regularly, as this influences the amount of cover you and your family need, and ultimately the monthly premium.
Top top tip: The older you get, the harder it is to get new life insurance cover.
What if you already have life insurance?
It means you’re ahead of the curve, but you should definitely check if your current policy provides enough cover for the extra debt of a home loan. If your cover is too low, you should consider getting extra life insurance to cover that. Remember, the idea here is to avoid leaving your family with unpaid debts.
Well, for one thing, you don’t have to get it from the bank that’s giving you the home loan. A lot of people don’t realise they have options here, so you should shop around to find a life insurance product that gives you the best cover at the right price.
If you were in a hurry to get life insurance when you bought your home, and you obtained it through your mortgage provider, you can take your new policy to your bank to cancel your life insurance policy with them.
Top tip: Life insurance through your bank may actually cost you more than going the long-term insurance provider route (think Liberty Life, Sanlam, Momentum)
When should you get it?
If you have dependents and no life insurance, then getting life insurance should be really high on your priority list, regardless of becoming a new homeowner. If you already have life cover, but need to get more to cover your new bond, you should aim to get it before the house is transferred into your name.