Every time you go to the bank to borrow money, the bank takes out an insurance policy on you.
By taking out what is known as a “Loan to Value” margin on what the property is worth versus what they are prepared to lend you the bank is taking out their form of “Risk Insurance”.
The difference, known as the margin, protects the lender in many ways: It helps them reduce their risk as they know you’ve had to save hard to stump up the deposit, and it also gives them a “margin of error” should something go wrong.
You see, having the title to the house means the bank will always get paid before you do; and let’s be honest, everyone who has a mortgage always has that little worry in the back of their head “what would happen to the mortgage if I lost my job?”
But what would happen if you couldn’t work for an extended period of time due to your health, and therefore couldn’t pay your mortgage?
How would 12 months off work affect your mortgage while you battled a health condition such as cancer (note: 1 in 3 will suffer from cancer before the age of 65)?
Imagine being a tradie with a broken arm? A farmer with a broken leg? What would happen to your mortgage if the “black dog” of depression hit?
Even worse still, what would happen to the home that your family lives in if you were to pass away prematurely?
You see, if you can’t pay your mortgage the bank does have insurance. They have it through lending you less than the house is worth (so they know they won’t lose) and through their ability to call on the loan if you can’t make payment.
We have all heard of someone who has been affected by a tragic set of circumstance that is now rendering them in an extremely financially vulnerable situation. While dealing with the challenge of personal and health issues they have the compounding pressure of financial woes to face as well.
However, it doesn’t have to be that way. A review of your personal risk planning strategy gives you a starting pointing on what could happen to you and your family should a health event, or tragedy strike.
Even better, we help you completely understand your current insurance and super, and work with you to create a strategy to help you mitigate these risks.
As unpleasant as these conversations can be, a well-tailored personal insurance strategy can help provide you with peace of mind knowing that you will be financially secure in your time of need.
For further information or to request a review of your personal insurance strategy, contact your local adviser.