Having the right insurance in place is crucial for financial protection
Imagine you are no longer able to repay your bond, what will happen to you and your family?
Insurance cover will provide you with the peace of mind you deserve while you are still paying off your house. It’s important to always be prepared as life is unpredictable and can happen to anyone at any time. Don’t put your family in a situation where the bank has to repossess your house due to a shortage of income.
What is Home loan insurance?
This product was designed to protect the public of South Africa against losing their homes due to unforeseen life events. Even though every insurer is different, most insurance policies will cover the following:
- Natural and accidental death.
- Permanent and temporary disability.
- Terminal illness.
You can compare a few quotes to see which one would fit your needs the best. Some covers will allow you to add each benefit separately and some would allow you to enjoy these benefits on an accelerated structure.
Freestanding vs. accelerated benefits
Often you will have to choose between taking accelerated and freestanding benefits. Most South Africans don’t know the difference and this could make a huge difference to your finances should the need occur for you to claim.
The advantage of taking a home loan insurance policy with freestanding benefits is that if you got disabled today, they will pay out without reducing your total cover amount. This means that when you pass away your family will still receive the full amount of cover you are insured for.
It is important to remember that a freestanding cover could be slightly more expensive, but much more worth it in the long run.
Insurance cover with accelerated benefits may be a cheaper option for you to consider. Keep in mind that a mortgage cover policy with accelerated benefits will reduce your total cover amount when you claim.
So, for instance, if you become unable to earn an income due to a critical illness or disability, the amount the insurer pays out will be subtracted from your total cover amount; this might leave your family with little to no cover when you pass away.
That’s why it is always important to weigh your options and decide when you have all the information. This site can help you find the right insurance option for you and your family.
Why is insurance a requirement?
Mortgage cover lowers the lender’s risk of lending the money to you for your house. Most banks need some guarantee that they will get their money back should you not be able to pay them back yourself.
If you are applying for a mortgage you will find that most lenders will require you to have a certain amount of insurance in place for them to approve your loan.
This is also to protect you and your family against the repossession of your house, in the event that anything happens to you.
Make sure that you are not underinsured
When you are looking at insurance quotes, it is important that you select the right amount of cover. Selecting only the minimum amount of cover that is required by the bank may not be enough to ensure the security of your family.
Remember every loan will have interest and if you’re only insured for the value of your house, your family might still sit with a huge amount of debt in the event of you passing away.
Make sure that your loan is fully covered not just for the minimum required amount, but for the calculated interest amount as well.
Choose from a range of mortgage insurers and make sure that you make use of the insurance calculators at your disposal as this will help you to determine exactly how much cover is truly needed.
Is insurance transferable?
Every insurer has different terms, but yes, the great part is that if you take out the home loan insurance while you are still young and healthy you will be paying a very low premium. This cover can then still be used when your bond is paid off or when you buy your second house.
With home loan insurance, you will have the opportunity to only take cover for the term of your bond. Having term cover can save you money as the insurer’s risk is lower, which means a lower premium for you as well.
However, if you have the option of taking a whole life insurance cover it is the more sensible decision to make. This will help you to save in the long run as you won’t have to apply for life cover at a later stage in your life.
Apply for Home loan insurance
You will have the option to apply for an insurance quote online, speak to a consultant, or physically meet with a broker to get you covered. Generally, they will require you to fill in your basic information and they will also ask you a few medical and lifestyle questions.
The great part about mortgage insurance is that it is generally very cheap and offers great protection to you and your family.
Make sure that you take cover with a registered Financial Services Provider. It is important to always do your research about a company before you put your life and the lives of your loved ones in their hands.
You can do this by firstly confirming that they are indeed registered and regulated by the National Credit regulator (NCR). If you found a company that offers you a great deal, always verify if their details are there and if you can trust them.
Secondly, a great way of knowing who is who in the insurance industry is by going to the ombudsman complaints stats, where you will see how good a company has been with paying out their claims.
How does payout work?
Your typical mortgage cover policy will pay out a one-off lump sum in the event of death, disability, or critical illness.
In the event of you getting temporarily disabled or retrenched, the cover will generally cover your monthly bond repayment for a period of up to 12 months.
- Home loan insurance is generally low in cost and high in cover.
- It is easy to apply for and is approved quickly unlike normal life insurance covers.
- It is usually just for the term of your mortgage, but you can have the option of keeping it for longer with certain companies.
- Home loan insurance is 100% customized according to your needs, the value of your house, and your budget.
- You get to prevent repossession of your house in the event of your death, disablement, illness, or retrenchment.