Buying a home is one of the top reasons why people get life insurance. For many Kiwis, this is often an exciting milestone in their adult lives. However, this excitement might come with a bit of worry, as well.
Affording the monthly repayments and paying for upkeep or repairs may be the most pressing concerns for many homeowners. But if asked, protecting this big investment is likely very important to them, too. However, some Kiwis may be overlooking one way to help protect their home: life insurance.
Protecting your biggest asset
Since a house is probably the largest purchase most people make in their lives, it makes sense that they’d want to protect it. But how does life insurance factor into this? Whilst homeowner’s and contents insurance protect the physical building and everything kept inside, life insurance could help your family remain in their home during some worst-case scenarios.
If you are diagnosed with a terminal illness or pass away suddenly, how would your family pay the mortgage? You may have a partner who also works, but covering the house payment—along with all the other bills and expenses—might be too tough for them to do alone. A stay-at-home parent could have an even harder time making ends meet, especially if they’re unable to start working right away.
Life insurance is one way to help protect your home and your family’s financial future. The benefit they receive could be put towards the mortgage, or any other bills that will still need to be paid. This could mean the difference between your loved ones keeping the family home or needing to sell it during what is already a tough time.
Getting the right amount
Having some life insurance is probably better than having none at all. However, if you decide to take out cover, it probably makes sense to have the right amount for your family’s needs. Being underinsured—that is, not having enough life insurance to meet your financial obligations—is a problem for many New Zealanders.
So how much is the right amount of life insurance? There is no one answer. The amount your family may need could be completely different to what your neighbours, friends or coworkers might need.
People often consider many things when choosing their life insurance benefit. They may think about their family’s current lifestyle or what the future might hold for them, as well as their household budget. For example, someone could decide to get a benefit amount large enough to pay off the entire mortgage if they were to pass away. Another person might opt for enough to cover the mortgage for 10 years, giving their spouse plenty of time to get back on their feet without putting too much strain on their current paycheque.
Rethinking your cover
Buying a house might be the reason why you get life insurance, but there are other home-related events that may mean it’s time to update your cover. Moving house, making improvements or downsizing could be cause to review your policy.
If you’ve chosen a benefit to cover the entire mortgage, then taking on larger repayments after buying a bigger home may mean updating your policy. Similarly, taking out a loan to fund renovations or other big home improvements may also be a time to increase your benefit amount.
On the other hand, there are times when lowering your life insurance benefit might make sense. Downsizing to a smaller home after the kids move out or after retirement may mean that you no longer need as much cover as you once did. Decreasing your cover might also be appropriate once you’ve paid off your mortgage completely.
Home is where the heart is
Life insurance could be an important way to help protect not only your house, but the life your family is building inside it. Momentum Life offers great policy options, with the flexibility to meet your needs now and into the future. If you’re a new homeowner, searching for a property or ready to help protect what you’ve already got, request a quote and see how we might be able to help!
Looking for other ways to help protect your family’s financial future? Writing a Will might be a good place to start.
Disclaimer: The information provided in this article is of general nature, and does not take into account your personal situation. You should consider whether the information is appropriate to your needs or seek professional advice, where necessary.