Life cover
What does it pay?
A lump sum on death, or generally on diagnosis of a terminal illness. Frequently used to clear a mortgage so a surviving partner or family is not forced to sell.
INSURANCE
The question that comes up once you owe the money
Taking on a mortgage changes what happens to your household if your income stops. Worth thinking about before it does.
WHY IT COMES UP
A mortgage is a long commitment that assumes an income
When a household takes on a thirty-year loan, it is implicitly assuming that the income servicing it continues. Personal insurance exists to deal with what happens if it does not — through death, serious illness, or an injury that stops you working.
The point is not that everyone needs every kind of cover. It is that the question is worth answering deliberately rather than by default, and the moment you take on a large debt is the natural time to answer it.
Visayab Financial Services arranges credit. We are not licensed to give financial product advice, which means we cannot recommend an insurance policy or tell you how much cover you need. What we can do is flag the question and introduce you to a licensed adviser who can.
THE MAIN TYPES
What the different covers do
Income protection
What if you cannot work?
Replaces a proportion of your income for a defined period if illness or injury stops you working. Waiting periods and benefit periods vary considerably between policies.
TPD and trauma
What about serious illness?
Total and permanent disability cover pays a lump sum where you are unlikely to work again. Trauma cover pays on diagnosis of specified conditions, regardless of whether you can work.
WORTH KNOWING
Things people find out too late
Worth checking
- Cover you already hold — many people have default cover inside superannuation.
- Whether it is enough — default cover is often well short of a mortgage balance.
- How it is owned — policy ownership affects tax and how quickly a claim pays.
- Definitions in the policy — the wording decides what actually gets paid.
Common traps
- Non-disclosure at application — an incomplete health history can void a claim later.
- Assuming super cover is sufficient — it rarely is, and it can lapse if contributions stop.
- Cancelling cover to save money — re-qualifying later depends on your health then.
- Buying without advice — cover you do not need is as wasteful as cover you lack.
COMMON QUESTIONS
Questions about cover and a mortgage
Does a lender require me to have life insurance?
Generally no. Lenders require insurance over the property itself — building insurance is a standard condition — but personal life or income cover is usually your own decision.
Where lenders mortgage insurance applies, be clear that this protects the lender, not you or your family.
Is the cover in my super enough?
Often not. Default cover inside superannuation is typically a modest sum that may fall well short of a mortgage balance, and it can lapse if contributions stop.
It is worth checking what you actually hold. A licensed adviser can tell you whether it is adequate for your circumstances.
Can you tell me how much cover I need?
No, and it would be unlawful for us to try. Recommending an insurance product or a level of cover is financial product advice, which requires an Australian Financial Services Licence.
We can introduce you to a licensed adviser who is able to assess that properly.
When is the best time to look at this?
Around the time you take on or substantially increase a mortgage, since that is when the consequences of losing an income change most.
It is also worth revisiting after major life events — a child, a separation, a change in income.
Important information
Visayab Financial Services provides credit assistance. We are not licensed to provide financial product advice and nothing on this page is a recommendation to acquire, vary or dispose of any insurance product. Any introduction to an adviser is an introduction only, and if we have a commercial arrangement with them it will be disclosed to you.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.