Life Insurance for Australians with a Mortgage
Insuring Against Death & Disability Recommended to Cover Mortgage
Sep 15, 2009
According to the Australian Bureau of Statistics data, while the overall home ownership rate in Australia has remained fairly stable over recent decades, there is a widespread perception that rising property prices and interest rates have made home ownership less attainable. Between 1991 and 2008, the average loan commitment to first home buyers increased from $96,100 to $215,100 in 2005-06 dollars.
A survey of income and housing costs in 2000 indicated that low to middle income earners in Australia spent around 30% of their gross income on housing.
Since nearly one-third of the household income is used to pay the mortgage it is important to ensure that contingency plans are in place to cover the mortgage and save the house if the income stops due to death or disability. Taking out a life insurance policy is one way to address this.
Insurance Policies that Families Have
A family has many insurance policies. Some insurance policies are mandatory by law. In addition some families take out various forms of other insurance policies for peace of mind. The mandatory policies include:
- Building insurance- since most families have a mortgage they have to take out building insurance to meet the lending requirements of the financiers.
- Third party car insurance- when a motor vehicle is registered, third party insurance is automatically included.
The additional policies that a family may have include:
- Home contents insurance to cover loss or damage to household items.
- Comprehensive car insurance to compensate for the loss or damage to the motor vehicle.
- Health insurance to access private health facilities.
- Income protection insurance to safeguard the loss of wages due to illness.
Current Status of Life Insurance Policies
Life insurance cover is not mandatory nor does it appear that most people give life policies the same level of importance as they do to other policies such as vehicle insurance or health insurance.
“We know that six out of ten people with dependent children simply do not have enough life insurance to look after their families if something happened to them. We also know that superannuation is only providing people with 20 per cent of the life insurance they need,” says Jonathan Poole, Chief Executive Officer of Allianz Australia Life Insurance.
This is an area that is being promoted in recent times due mainly to the rising level of debt that most Australians carry by way of mortgages and other consumer loans.
Therefore, Insurance companies and mortgage providers are pro-active in educating consumers as to the necessity and benefits of taking out death and/or disability insurance to cover their families. Having a life insurance policy that at least pays off the mortgage could mean a less stressful time for the families left behind.
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