Mortgage Protection Insurance

What is mortgage protection insurance?

Mortgage protection insurance, often referred to as home loan insurance, is an optional insurance designed to help you, the borrower, repay your home loan if unfortunate circumstances render you unfit to work. These unfortunate circumstances can include illness, injury, involuntary unemployment or death.

Read our complete guide to refinancing your home loan here.

How is mortgage protection insurance paid out?

Mortgage protection insurance can be paid either through a lump sum, or through periodic loan repayments for an agreed amount of time.

Is mortgage protection insurance the same as Lenders Mortgage Insurance (LMI)?

No, mortgage protection insurance is not the same as Lenders Mortgage Insurance. LMI protects the lender if the borrower defaults on the loan, while mortgage protection insurance protects the borrower by helping repay their home loan if unfortunate circumstances render them unfit to work.

How do I know if I need mortgage protection insurance?

Deciding if you need mortgage protection insurance is a personal choice. You will need to weigh up the security of having this protection versus the monthly financial cost. Mortgage protection insurance can be useful if your employment is unstable and can be suitable for the self-employed and small business owners.

What key features should I look for in mortgage protection insurance?

To ensure your security, it’s important to shop around for the right insurance for your personal situation. The below factors can influence your choice of mortgage protection insurance.

  • Coverage

  • Waiting period

  • The size of your family

  • Your income

  • Your general health

What are the pros and cons of mortgage protection insurance?

Benefits can include peace of mind and discounts on joint policies. However, the disadvantages include the one-off payout and the issues that can arise out of a relationship breakdown.

Advantages of mortgage protection insurance:

Just like any other insurance, one of the main reasons people pay mortgage protection insurance is for the peace of mind it offers.

  • In the events that you are unable to work due to injury, sickness, involuntary unemployment or death, you and your family will be protected

  • Fast application process

  • Discounts on joint policies

Disadvantages of mortgage protection insurance:

  • Mortgage protection insurance only pays out if unfortunate circumstances render you unfit to work

  • It doesn't cover as much as other protection insurances (such as income protection insurance) and this insurance doesn’t offer as many long-term features

  • It doesn’t cover voluntary unemployment

What types of property does mortgage protection insurance cover?

Mortgage protection insurance coverage is determined by the size of your home loan and its remaining term rather than property type. We suggest speaking with your provider if you’re unsure if your property qualifies or not.

Can you save with an offset account? Our in-house experts share their advice here.

How much does mortgage protection insurance cost?

Typically, mortgage protection insurance costs around 0.5% to 1% of your entire loan amount on an annual basis. To get mortgage protection insurance, talk to your specific lender, and make sure to review their policies and features to see whether it will benefit you in the long run.

Is there a difference between income protection insurance and mortgage protection insurance?

Yes, there is a difference. Income protection insurance insures your wage, while mortgage protection insurance insures your home loan.

What is the difference between the two?

  • Mortgage protection payments are calculated based on your loan size while income protection will cover a set amount (say 75%) of your income

  • Income protection is geared towards self-employed people where mortgage protection has a lot of limitations with the self-employed

  • Mortgage protection will pay a lump sum towards your mortgage specifically in the event of death than income protection (since it is calculated based on the balance of your home loan at the time of payment)

  • Income protection insurance can cover costs such as rehabilitation or medical bills

  • Mortgage protection insurance can be harder to come by and covers fewer circumstances

Does income protection insurance include mortgage protection?

Income protection insurance does not typically include mortgage protection, but they are very similar in nature.

The main difference is that in the event of injury, death or illness, a mortgage protection payment is calculated on the outstanding loan amount at the time of payment, while an income protection payment is a set amount.

Important legal stuff

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# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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