Have you considered how you would pay the mortgage if you or your partner were to fall ill or lose a job? It’s not a question many people think about while they’re busy working, running a home, looking after kids and paying the mortgage, but it’s something you need to carefully consider.
Your income is your biggest asset and needs to be protected like your car or home. If the worst case scenario happened, like a critical illness, sick child or redundancy, and you weren’t able to work for an extended period of time—or even the rest of your life—what kind of life would your family have?
There is a range of insurance cover available—including trauma (also Children's Trauma), income protection, mortgage protection and redundancy cover. These insurances are all there to help protect your future earnings in the event you are unable to work.
As a minimum, we recommend people have life insurance when they take on a mortgage to cover the amount of the loan and two year’s worth of income, so if you or your partner were to die your home and short-term income would be taken care of. However, if you can afford some extra cover, it is worthwhile discussing this with an adviser to work out which insurances, and how much, are best for your personal and financial situation.
If the worst scenario strikes and you don’t have the right cover in place, you need to talk to your bank or mortgage adviser as soon as you as can.
The earlier you seek help, the quicker the problem can be sorted. Solutions can include mortgage holidays or a change in interest terms, but these are only short-term stop gaps with long-term effects, so it’s important to talk to the experts. In extreme hardship, you may be able to withdraw your KiwiSaver funds, but this will also depend on a range of factors.
It’s a good idea to reassess your financial situation every year, or if you have significant changes at home (marriages, babies or new jobs) to make sure you’ve got everything covered to the best of your ability. If you’ve got some questions about the best way of doing this, we’re here to help. Give us a call, and we can help you put the right plan in place.