New initiative by major bank
CBA has just launched a mortgage protection product called “Compassionate Care”. It is a limited insurance product that covers you in case you, your spouse or dependant is diagnosed with a terminal illness or passes away.
As Finance Brokers,
we are well aware of the importance of Mortgage Protection Insurance. It covers your mortgage repayments -or the actual debt itself- in case you experience a serious life event like a major illness or accident.
Taking out a loan is a long term commitment. An agreement with the bank to pay back a certain amount of money every week or month regardless of your circumstances. No matter what happens to you, you need to pay the bank. If you think about that for a moment, that is actually a very big deal.
Your life will go through many changes in the next 30 years. You will change jobs, maybe get married, take holidays, get sick or have accidents, have children to name a few.
But despite all of that, you have agreed to make this payment every month for 30 years.
Some health and risk statistics:
- 1 in 5 Australian families will experience an unexpected death, accident or illness of a parent
- In 2014, 946 new cases were diagnosed per 100,000 individuals
- 20% of mortgage defaults are due to an illness or accident
- The average cost of raising 2 kids in a middle income family costs $812k
So if something unexpected happens, you better have a plan or a financial back up in place to cover yourself and your family. And preferably both. Because when your health or a family members health needs your attention, it often comes at the expense of a job or business.
When your health is at risk, you want to be able to focus on getting fit again. And let me tell you, that is much easier when you know you don’t have to stress about your finances.
The two things to have in place are:
- A financial buffer to draw on immediately. A good rule of thumb for the amount is: Add up all your monthly expenses and multiply that figure by 3. That amount needs to sit in an offset or redraw or savings account. Readily available for you to draw on the instance you need cash.
Personal protection insurance. That can be mortgage protection, income protection, life, TPD, trauma or similar. An insurance that kicks in when you are off work or otherwise incapacitated and the money from salary or business stops. Essential but complex, personal insurance policies come with exclusions, a multitude of insurers, a wide range of policies and fine print. Get in touch with a insurance specialist to make sure you get the right cover.