Mortgage Insurance

There is common confusion when the words 'Mortgage Insurance' are mentioned.

Let us try and simplify it for you:

There is 'mortgagee insurance' that you may have to take when you apply for a home loan and your deposit is less than 20% of the purchase price. This insurance does not protect you, it protects the bank should you not be able to meet your repayments and they are forced to sell you home.

Then there is Income Protection - which many people also call Mortgage Insurance. Income Protection does protect you in the event that you cannot work due to an accident or illness. It pays you a replacement income up to 75% of your normal earnings and you can use some of this towards your mortgage repayments.

Then there is Mortgage Insurance - which is similar to Income Protection but will only cover up to the repayments of your mortgage and is a simplified form of Income Protection.

This would not be suitable if you need more that just your mortgage repayments to be covered and need to live off your income. Sometimes this can be more expensive than straight income protections so it is always worth checking both.

The following is a summary of what we offer for Mortgage Insurance:

(exert from AIG's Mortgage Protection PDS)

Mortgage Protection offers a simplified life insurance product that can be purchased if you have a mortgage. The product will cover mortgages on residential and commercial properties owned by individuals as their primary home or as an investment property.

Individuals may effect Mortgage Protection in their own name or in the name of their company. Proof of the amount of the mortgage/loan outstanding and of the amount and frequency of the mortgage/loan repayments at the time of your policy application must be provided to us prior to the payment of a claim under the policy. 

Package 1
Available to occupation categories where the life insured is in paid full-time employment (i.e. working 25 hours or more per week and 48 or more weeks per year, excluding public holidays).
Benefits include:
- Term Life benefit;
- Permanent Disablement benefit (on either an ‘any occupation’ or ‘own occupation’ definition of total and permanent disablement);
- Disability Income (Agreed Value) benefit with Claim Escalation benefit

Package 2
Available to occupation categories where the life insured is not in paid full-time work (i.e. not satisfying the definition of ‘full-time employment’ applicable to Package 1 above or on full-time ‘home duties’) and to occupation category E in either paid full-time or paid part-time employment.
 Benefits include:
- Term Life benefit;
- Permanent Disablement benefit (on a ‘home duties’ definition of total and permanent disablement)


Replacement Income benefit provides:
 > a monthly income upon the total disablement of the life insured;
 > a proportion of the monthly income upon partial disablement;
 > AIDS cover;
 > 30-day waiting period;
 > 5-year benefit period;
 > stepped premiums only;
 > premium discounts for an insured monthly benefit of $3,000 or greater.

Total Disablement Benefit: If the life insured is totally disabled for longer than the waiting period, the monthly benefit will be payable from the end of the waiting period and will continue throughout the benefit period as long as the life insured continues to be totally disabled. The benefit will be calculated on a daily basis and paid monthly in arrears. The amount of the total disablement benefit may be subject to claim offsets.

Partial Disablement Benefit If the life insured is partially disabled beyond the end of the waiting period, after having been totally disabled for at least 7 consecutive days from the start of the waiting period, a partial disablement benefit will be payable. This benefit will be a proportion of the monthly benefit and will be payable from the first day the life insured is partially disabled after the end of the waiting period. The benefit will continue throughout the benefit period as long as the life insured continues to be partially disabled. The benefit will be calculated on a daily basis and will be paid monthly in arrears. If the life insured is earning 25% or less of his or her pre-disablement income (agreed value) during any of the first 3 months of partial disablement after the end of the waiting period, the total disablement benefit amount will be paid for that month.