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Writer's pictureJodene Smith

How To Protect Your Mortgage: Life Insurance, Critical Illness Cover and Income Protection Explained

Ah, the joys of adulting! Gone are the days of carefree living, where your biggest concern was deciding what takeaway to order on a Friday night. Now, you're juggling mortgages, bills, and the responsibility of making sure your loved ones are looked after, even if the universe decides to throw you a curveball. Welcome to the wonderful world of insurance!


Now that you have the home, let’s untangle three of the most common types of protection to ensure you don’t lose it!

 

Life Insurance: The Ultimate "Just in Case" Plan


Life insurance is like that safety net you hope you'll never need. It’s a policy that pays out a lump sum to your loved ones if you were to suddenly shuffle off this mortal coil (aka, die). Essentially, it’s your way of saying, “Don’t worry, I’ve got you,” even from beyond the grave.


Mortgages are a huge financial burden, and still require repaying if you pass away. Life insurance ensures that your mortgage will be paid off if the unthinkable were to happen, so your family can stay in their home without the bank breathing down their neck.


Depending on your age and health, life insurance can be surprisingly affordable. Think of it as the ultimate selfless purchase.


If you’ve got dependents—like kids, a partner, or even a particularly needy pet—life insurance is worth considering. It’s especially crucial if you’re the main breadwinner or have significant financial obligations.

 

Critical Illness Insurance: The "What If" Safety Net


Critical illness insurance is like the superhero you didn’t know you needed. This policy pays out a lump sum if you’re diagnosed with a serious illness like cancer, heart disease, or a stroke. Think of it as a financial cushion for when life throws you a major health curveball.


During tough times, this payout can help cover medical expenses, pay off debts like your mortgage, or even fund a much-needed holiday to recuperate.


You decide how to use the money. Whether it’s paying for private treatment, adapting your home, or just taking time off to recover, the choice is yours.


Knowing you have financial support during a health crisis can make a world of difference when you’re focused on getting better.


If you’re concerned about the financial impact of a serious illness, this insurance is worth a look. It’s particularly valuable if you don’t have a significant savings cushion or if your employer’s sick pay isn’t all that generous.

 

Income Protection: The "Steady Ship" in Stormy Seas


Income protection is like having a backup generator when the power goes out. This policy provides you with a regular monthly income if you’re unable to work due to illness or injury. It’s designed to keep your finances afloat while you focus on getting back on your feet.


Instead of a one-off payout, income protection gives you a steady stream of income until you’re able to return to work or until the policy ends.


Income Protection provides long-term security. Some policies can cover you for a couple of years, making sure you’re supported during a prolonged illness or recovery period. Full protection covers you for your entire working life, providing you with a salary for life if you are unable to work again due to injury or illness.


Usually, you can secure up to 60% of your salary or self-employed income; and choose the waiting period before payments start (known as the deferred period), tailoring the policy to suit your needs.


If you’re self-employed, think of it as private sick pay. If you're employed but have limited sick pay, or simply can’t afford to be without an income for an extended period, income protection is a smart move. It’s like having a financial umbrella for those rainy days.

 

How to choose the right protection?


Here’s the twist: you might need all three! Life insurance, critical illness insurance, and income protection each cover different scenarios, and they can complement each other nicely. Think of them as the dream team of financial security.


·       Life insurance takes care of your loved ones if you’re no longer around.

·       Critical illness insurance steps in when you’re hit with a major health crisis.

·       Income protection ensures you’ve got money coming in if you can’t work.

 

Of course, it all depends on your personal circumstances. The best advice? Take a good look at your financial situation, consider what’s most important to you, asking yourself how you would repay your mortgage, bills or look after your family if you got sick, passed away or were unable to work. After all, adulting is tough enough—why not give yourself a little peace of mind?

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