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Loan insurance through bank
4 replies to this topic
Posted 09 November 2012 - 10:14 AM
Do you have insurance on your home loan through the bank?
We have insurance to cover death and loss of job etc. but it's costing a small fortune every month as we have our home loan and a personal loan split so 4 loans and 4 lots of insurance all up
We have a death benefit through superannuation that would cover the loans if one of us died. Do we still need the insurance for each individual loan?
Is it better to just get an income/ death insurance through a separate company that will cover all loans in one payment?
Posted 09 November 2012 - 10:23 AM
I advise you to keep it. My parents had insurance on their homeloan and cancelled it because they thought they were paying so much money for nothing. Two months after they cancelled it My dad went to the doctor and was diagnosed with terminal liver cancer. When he passed all my mum had was the separate life insurance. Which wasn't enough to set her up till retirement. When this happened my parents were mid 50's. Ever since I've made sure to have loan and income protection insurance. Just because unfortunately you never know what's around the next corner.
Perhaps you could ring and ask for a discount on the insurance. Im wit NAB and thought id give it a go. Due to having my home loan, car loan and credit card insurance all with them they gave me a 15% discount on each policy. Worth asking i think
Posted 09 November 2012 - 10:30 AM
Also, I think the premiums you pay are tax deductible?
But it's always worth shopping around and comparing cover vs prices....
Posted 09 November 2012 - 10:34 AM
Depends what it covers, and in the end what risk you want to bear and how much you want to pay to cover it is up to you. Being underinsured can end badly, being overinsured can cost you a lot of money over your lifetime and end up never being needed.
It also depends on what the terms are that the loan insurance would pay out on, vs your life/income protection insurance.
For me personally, I would do life and income protection insurance and skip the loan insurance, unless the loan insurance was significantly cheaper or covered more situations. Mainly because the life/income protection insurance a) covers you in general regardless of how much is left on your loan, and you can factor the loan amount into it, and b) I believe that it's beneficial to get adequate life insurance while you are young and healthy because it becomes hard to get into if/when you are diagnosed with illnesses, so it's more of a long term plan than a short term duration of the loan thing. Obviously this only holds if the life/income protection insurance IS high enough to allow for paying back the loan.
I think of loan insurance as something that really protects the bank more than it does you.
But like I said, that depends on the costs and the terms of it - only you can decide.
Posted 09 November 2012 - 10:39 AM
You could get another policy which is the lump sum of all 4 loans (there are normally large sum discounts built into policies. EG: $250K may cost $40 a month but $500K may only cost $60 a month)
We didn't need insurance as our loan did not put us into the "must need" category. We did get it though as I think it is stupid to not have it (but I work in insurance) For each of us there is enough to pay out debt and have some left over, we could then either buy an investmant outright (so get rental income) or we could just live off x amount.
You will not find insurance outside of the bank that will cover loss of job for reasons other then sickness or injury (from my experience). I have this on my CC cards and had it on my personal loan when I was single and before I actually had life insurance or Trauma insurance or income protection. We choose not to take this out with our mortgage BUT we can put our mortgage on hold due to loss of employment.
You would have to talk to your bank about whether you would be able to cancel the Life isnurance part but keep the loss of income part. (Also investigate whether or not it is for loss of your job through anything other then sickness or injury)
If you cancel the life insurance you may have to provide a certificate of currency to the bank to prove you have the insurance that they require. Remember though that part of your death benefit in your super is made up of your actual Super so just make sure you are using the Death Benefit/Terminal Illness benefit and it hasn't automatically calulated the Super in. My does this but my DH's Super fund sets it out more easily to read.
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