Home Loan Protection insurance

How do I make sure my mortgage is covered if I get seriously ill, injured, or die? There are a few ways people approach this. For serious illness or injury, the most thorough route is seeing a financial planner – expect to pay around $2,000 for a Statement of Advice and go through a full medical assessment. That process is comprehensive and worth it for complex situations. The faster alternative: give me three pieces of information – your age, whether you smoke, and how much you want to cover – and I’ll come back with an exact monthly cost for My Protection Plan. No medical tests, no upfront fees. For death cover, most people assume their super has it sorted. Many funds do provide life cover by default, but the default amount is often well short of what a family with a mortgage actually needs – research suggests the median default cover meets around 65-70% of basic needs for two-person households, and less for families with dependents. If something happened to you tomorrow, would what’s in your super be enough to clear the mortgage and keep your family on their feet? My Protection Plan covers both scenarios – a lump sum on diagnosis of a serious condition or specified injury, and a separate death and terminal illness benefit. I’ll raise it with you during the loan process so you have the information you need to decide.

What’s the difference between this and LMI? LMI (Lenders Mortgage Insurance) protects the lender if you default on your loan. You pay for it, but it’s not there for you – it’s there for the bank. My Protection Plan is the opposite. It’s optional cover that protects you and your family if a serious medical event or injury affects your ability to keep up with repayments.

Isn’t there controversy around mortgage protection insurance? Yes – and it’s worth addressing. ASIC reviewed a category of insurance called consumer credit insurance (CCI) in 2019 and found it was poor value for money. My Protection Plan is a different product. It’s a life and trauma insurance policy distributed through ALI Group and issued by Zurich Australia – not a CCI product sold by a bank at the point of a credit application. The distinction matters when you’re assessing whether it’s right for you.

Is this income protection? No. My Protection Plan pays a lump sum if you’re diagnosed with a covered condition, suffer a covered injury, or pass away. It’s not a monthly income replacement – what you do with the payout is up to you. Some clients use it to cover mortgage repayments while they recover; others use it for medical costs, living expenses, or anything else.

What conditions are covered? The trauma benefit covers a broad list of serious conditions – various cancers, heart attack, stroke, cardiomyopathy, multiple sclerosis, and more. The specified injury benefit covers fractures to major bones. The full list is in the Product Disclosure Statement, which I share with every client as part of the process.

Are there any exclusions? Yes. Pre-existing conditions that you’ve received medical treatment or consultation for in the five years before taking out the policy are generally excluded. There’s also a 90-day qualifying period for most trauma conditions, meaning if a condition first occurs within 90 days of the policy start date, the benefit won’t be payable. Read the PDS carefully before deciding.

Do I need it if I already have insurance through super? Possibly not, but worth checking before you assume you’re covered. Super funds generally provide life and TPD cover by default, and some provide income protection, but the default amounts often fall short of what a household with a mortgage actually needs. Trauma cover hasn’t been available through super for new members since July 2014, which is the type of cover most relevant to a serious illness scenario.

How much does it cost? It depends on your age, gender, smoking status, and the level of cover you choose. For example, a 29-year-old male non-smoker covering $280,000 pays around $51 a month. You don’t have to cover the full loan amount – some cover is generally better than none, and you can adjust the level at any time.

Are there medical checks involved? No. My Protection Plan has no medical tests or medical questions as part of the application.

Can I cancel or change my cover later? Yes. You can adjust or cancel at any time. If your loan amount changes or your circumstances shift, the level of cover can be updated to suit.