Most people encounter home loan protection at settlement – their broker mentions it, the paperwork references it, and they’re not entirely sure whether it’s worth thinking about or whether it’s just something being sold to them. Both reactions are reasonable, and the honest answer depends on your situation.
What I want to do here is explain how My Protection Plan actually works, what it covers, and where it genuinely makes sense – without the sales framing.
What it covers
My Protection Plan is a life insurance product, not a repayment-linked insurance product. That distinction matters because it changes what gets paid and how.
There are three core benefits.
The Death and Terminal Illness Benefit pays a lump sum if you die, or if you’re diagnosed with a terminal illness and given less than 12 months to live. The benefit amount sits between $100,000 and $1,000,000, and can be used for any purpose – paying down the mortgage, covering household costs, supporting your family. It’s paid to the joint policy owner, your estate, or nominated beneficiaries.
The Trauma Benefit pays 30% of your Death and Terminal Illness Benefit if you’re diagnosed with one of the listed serious conditions. These include heart attack, stroke, coronary artery bypass surgery, most cancers, motor neurone disease, multiple sclerosis, and other significant diagnoses. The full list covers neurological conditions, heart conditions, cancers and tumour conditions, and other serious conditions including chronic kidney failure and severe burns. This benefit can be used however you need it – medical costs, taking time off work, reducing your loan balance, or covering household expenses while you recover.
The Specified Injury Benefit pays 3% of the Death and Terminal Illness Benefit (up to $7,500) if you fracture a specific bone – skull, jaw, collar bone, shoulder blade, upper arm, forearm, pelvis, upper leg, kneecap, or lower leg. It’s a smaller payment, but it’s there to provide some financial assistance during recovery from a serious fracture.
There’s also a Funeral Advancement of $10,000, which is an advance on the Death Benefit to help cover urgent expenses at the time of death.
One thing worth being clear about: My Protection Plan does not cover involuntary unemployment or loss of income from redundancy. If that’s the specific risk you want to cover, income protection insurance is the more appropriate product – and worth a separate conversation.
No medicals required
One of the practical differences with My Protection Plan compared to standard life insurance is that no medical exam is required to take out cover. This makes it accessible at the point of settlement, when people are already moving quickly and don’t want to navigate a health underwriting process.
The trade-off is that pre-existing conditions may be excluded. A 90-day qualifying period also applies to most trauma conditions – meaning if a covered condition first occurs or is diagnosed within 90 days of the policy start date, the trauma benefit won’t be payable for that condition. The death and terminal illness benefit doesn’t carry the same waiting period.
New clients also get 30 days of complimentary cover when the policy starts, which provides some protection from day one before the first premium is charged.
What it costs
Premiums are calculated based on age, gender, smoker status, and the benefit amount chosen. As a starting point: a 29-year-old male non-smoker with $280,000 of Death and Terminal Illness cover, $84,000 Trauma cover, and Specified Injury cover pays around $51.18 per month. A 32-year-old female non-smoker with $400,000 of Death and Terminal Illness cover, $120,000 Trauma cover, and Specified Injury cover pays around $59.52 per month.
The benefit amount is set at the time of application – it isn’t linked to or tracked against your loan balance. You choose the level of cover that makes sense for your situation.
Who it’s most relevant for
Home loan protection isn’t for everyone, and I’d rather be straight about that than oversell it.
It tends to make the most sense for people in the early years of a large mortgage, particularly where the household has limited savings outside the deposit and not much of a financial buffer at settlement. In that situation, a serious diagnosis – cancer, a heart attack, a stroke – creates both a health crisis and a financial one simultaneously. The trauma benefit exists to provide some breathing room.
It’s also relevant for joint borrowers where one person earns significantly more than the other. If the higher earner is diagnosed with a covered condition and needs time away from work, the benefit can cover the mortgage while the household recovers.
The death benefit is straightforward: it ensures the surviving partner or family isn’t left with a mortgage they can’t service alone.
Where it probably isn’t necessary
If you already hold a substantial life insurance policy with trauma cover, there may be genuine overlap. Check what trauma conditions your existing policy covers and what benefit amounts are in place before adding a second layer.
Most Australians with an industry super fund have some default death and total permanent disability cover. The amounts are often lower than people realise, and TPD cover is not the same as trauma cover, but it’s worth reviewing what you already have before assuming the gap is larger than it is.
If you have significant liquid assets outside the property – savings, shares, other investments – and could absorb a period of reduced income without the mortgage being at risk, the case for home loan protection is weaker.
What I actually ask clients
When I’m talking to a client at settlement, the question I find most useful is this: if you or your partner were diagnosed with something serious tomorrow, what happens to the mortgage?
For some people the answer is straightforward – they have income protection, solid super cover, and a financial buffer. For others, especially first home buyers who’ve stretched to get in, there isn’t much margin.
Each year in Australia an estimated 165,000 people are diagnosed with cancer, 54,000 suffer a heart attack, and 40,700 suffer a stroke. These aren’t remote possibilities – they’re conditions that affect working-age Australians regularly. The question is whether your financial position could absorb the impact without the mortgage becoming a problem on top of everything else.
I bring this up with every client at settlement because I think it’s part of the job, not because I’m trying to sell something. You can make the call yourself once you understand what you’re deciding about.
If you’d like to understand what My Protection Plan would cost for your situation, or talk through whether it makes sense given your existing cover, you can book a call here. More information is also on the home loan protection page.
Calculate Your Premiums
If it helps to put the premiums payable in context before making a decision, this calculator gives you a rough idea. There are more tools on the calculators page if you want to dig further into your situation.
Common questions
Is home loan protection the same as lenders mortgage insurance?
No. Lenders mortgage insurance (LMI) protects the lender if you default on your loan. It provides no benefit to you and is triggered by borrowing above 80% of the property value. My Protection Plan is the opposite – it’s optional insurance that pays you (or your estate) a benefit if you’re diagnosed with a serious illness, suffer a specified injury, or die. The two products address completely different risks.
Does My Protection Plan cover me if I lose my job?
No. My Protection Plan is a life insurance product and doesn’t include involuntary unemployment cover. If job loss is the specific risk you’re concerned about, income protection insurance is the more appropriate product – it covers a percentage of your income if you’re unable to work due to illness or injury, and some policies also include redundancy cover. That’s a different conversation, and worth having separately.
What happens if I refinance – does my cover lapse?
No. The policy isn’t linked to your loan or your lender. If you refinance, switch lenders, or sell and buy again, the cover stays in place for the life of the policy. This is one of the practical differences from older bank-issued mortgage protection products, which were tied directly to the loan.
Do I need a medical exam to get cover?
No medical exam is required. Cover can be set up at the point of settlement without any health underwriting process. Pre-existing conditions may be excluded, and a 90-day qualifying period applies to most trauma conditions. The full terms are set out in the Product Disclosure Statement, which is available at aligroup.com.au.
Can My Protection Plan replace income protection insurance?
No. They cover different things. My Protection Plan pays a lump sum benefit on diagnosis of a listed serious condition or on death – it’s not tied to your ability to work or to your income level. Income protection pays a percentage of your salary (usually 70-75%) if you’re unable to work due to illness or injury, and is designed to replace your income over a benefit period. The two products can sit alongside each other, but they’re not interchangeable.
Sources
- ALI Group – My Protection Plan Customer Brochure (July 2025) – aligroup.com.au
- Australian Institute of Health and Welfare – Cancer data (accessed July 2025) – aihw.gov.au
- Heart Research Australia – Heart attack statistics (accessed July 2025) – heartresearch.com.au
- Australian Institute of Health and Welfare – Stroke statistics (accessed July 2025) – aihw.gov.au
