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Should You Get Life, Health and Income Insurance When Buying A House?

Why do mortgages and insurance go hand in hand?

It’s likely that buying your first house will be your first big financial commitment. You may have never considered life, health or income insurance before. But having clawed up onto the first rung of homeownership you will likely want to make sure you stay there. Especially as it’s harder to get into that first home than previously. Adulting just got real. It’s exciting and also a bit scary; let’s hold hands and jump into the slightly morbid topic of life, health, and income insurance.

As a first home buyer, you may be thinking about having the ability to:

  • Still pay your mortgage when you are unable to work.
  • Recover from illness more fully and faster through the likes of private specialist care.
  • Take time off to recover from illness. 
  • Ensure the welfare of loved ones left behind, including keeping them in the family home.

If you haven’t been thinking about those things, you probably will be now after reading that list. Sorry, not sorry!

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We encourage clients who are interested in cover to make contact with an insurance broker early on in the mortgage approval process. A good insurance strategy can help secure a mortgage; if you have income protection in place before you apply for a loan, you are able to demonstrate to the lender that you will be able to make the repayments even if you are unable to work due to illness or injury. It also helps a bank meet its obligations under the CCCFA (Consumer Credit Acts), making you more attractive to a lender. And having cover in place before settling lets you sleep easy from that first night in your new home.

Given all the above, it’s not surprising that many mortgage brokers are also insurance brokers. But we believe a broker should stick to one thing and do it well, especially with the complexity and ever-changing policies and parameters of both mortgages and insurance. As such our mortgage brokers don’t do insurance, they are too busy focusing on being mortgage gurus. Instead, we have our own expert Korinne Ellis to help our clients with their insurance cover.

Why should you use an insurance broker?

Going to an insurance broker rather than directly to an insurance provider means the focus is on finding the best solution for you, rather than just being sold products from a particular company. And as our insurance broker Korinne says, “Sometimes the best advice I can give is for a client not to do anything at all, and that's great, right?!”

What should I look for in an insurance broker? 

A good insurance broker is solutions focused. What's most important to you and your family should always come first. They should take the time to get to know you and your situation, in a way and at a time that works for you. The solution should be tailored to you, and be affordable and feasible long term. This means adapting that policy through every age and stage, to keep you insured and to keep it affordable (we all know premiums increase with age). A broker should be confident enough in their process to be able to front up at claim time, knowing they can get you the outcome that you need because they've done the research for you. 

A good relationship with a broker will include regular reviews because insurance is dynamic. It's not a set-and-forget product; often less cover is required over time. 

insurance when buying a house
Our online course "How To Buy Your First Home" walks you through each step to present yourself to the bank as the perfect first-home buyer.

What to ask an insurance broker:

  • What are the claims statistics for the provider you have advised me to go with?
    • This means: when a claim is submitted, how often do they actually pay out? No one wants to pay all of those premiums for years only to not get paid out when it comes to claim time.
  • Financial stability ratings; what does this mean to me when I need to claim?
    • In what scenarios will this cover not pay out? 
  • Anything else that crosses your mind! It’s their job to satisfy your questions, so don’t hesitate to ask. Sorted.org.nz has a good article on insurance basics that may help prompt further questions to ask your broker.

At the end of the day, the question of what insurance to have, and how much cover to get is incredibly personal and can only be decided by you. Brokers are there to give you options and advice but it comes down to what you want to do. A good broker won’t try to talk you into anything, but rather talk you through the process and make sure you are well informed when making your decisions.

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insurance when buying a house

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