Life insurance for home loans: A guide for Kiwi home buyers

Why get life cover when taking out a home loan?

Life insurance pays a tax-free lump sum to your beneficiaries in the event of your death or terminal illness diagnosis, ensuring your loved ones can repay debts and cover costs. Having life insurance offers immeasurable security when acquiring a home loan, adding a solid layer of protection for this sizeable financial commitment.

Benefits of life insurance when taking out a home loan

• Provides financial protection for your family by covering the balance of the home loan if you become terminally ill or pass away
• Prevents your loved ones from having to sell the home or struggle with mortgage repayments
• Helps avoid potential foreclosure, ensuring your family can remain in their home
• Offers peace of mind for both first-time home buyers and experienced property purchasers, knowing their home loan won't become a burden for their dependants.

Life insurance benefits beyond home loan payments

Life insurance does more than just cover the costs of repaying your mortgage upon the death of the policyholder; it can also help with other financial responsibilities, such as:

• Funeral costs
• The income lost by a family member who took time off work to care for a sick loved one, raise children, or manage household tasks
• The costs of your children’s education, your family’s living expenses, and future plans
• Your partner’s retirement.

 For families, this extra support ensures stability and maintains their standard of living, even after losing an income earner.

Risks of buying a home without life insurance

A home loan is a commitment to a long-term financial obligation, often spanning decades. Without life insurance, your family is vulnerable to serious financial risk if the unexpected happens and they are left to pay the debt.

Take this scenario: If you pass away without life cover, your spouse or partner may suddenly be left with full responsibility for paying off the mortgage. With only a single income, they might struggle to keep up with the repayments on top of other bills and living expenses. In the worst case, they may be forced to sell the property to cover the outstanding debt, losing both the home and the stability it provided.

How much life cover should I buy?

The amount of life insurance cover you need depends largely on your income, the value of your home loan, and any other financial obligations. As a general rule, you should have enough cover to repay the full mortgage, but it’s also important to consider additional expenses, such as living costs, education for your children, and any outstanding debts.

For home buyers in New Zealand, factoring in these responsibilities will ensure your family remains financially secure in your absence. Let Policywise help you match the value of your loan with the right level of life cover.

Other insurance products for home buyers

In addition to life cover, several other insurance products can help protect your home if you or your family’s income earner falls ill, suffers a disability, or develops a serious medical condition, such as stroke, heart attack, or cancer. These insurance options can provide peace of mind and financial stability during difficult times.

Why does comparing insurance products and plans matter?

Comparing life insurance plans helps you select the right cover for your needs, however, navigating the options can be overwhelming. The value of working with a knowledgeable adviser, like Policywise, can’t be underestimated. Here’s why:

Identifying the right insurance plan

A professional adviser can help you assess your circumstances and determine which insurance plan is most suitable for you. They’ll take into account factors like your home loan amount, income, family needs, and long-term financial goals. This personalised approach ensures that you have the appropriate level of cover.

Saving on costs

When comparing insurance options on your own, it’s easy to overlook certain policies or end up choosing plans that may not provide the best value for money. An adviser can sift through the available products, identify plans that suit your needs, and potentially save you dollars. They can also assist in avoiding unnecessary add-ons or features that inflate costs without offering real benefits.

Avoiding mistakes

Choosing an insurance plan without expert guidance can lead to costly mistakes. An adviser helps you understand the finer details of each policy and highlights any exclusions or limitations that may affect your cover. This knowledge means you can make informed decisions and avoid pitfalls that could jeopardise your financial security.

Protect your dream with Policywise!

Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice, quotes, and comparisons, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service, because now is the time to get your life insurance sorted. Having a home means being secured, and what better way to solidify this security than by having your life insurance settled? Book a 5-minute callback with Policywise today; our service is fast and free. 

^{Disclaimer: This article is for general information only. Nothing in this blog or on this website is intended as medical, dietary, or financial advice. Although we aim to update our content regularly, you are advised to consult a Policywise adviser, health professional, or an appropriate specialist before acting on any information herein. They can factor in your personal circumstances or preferences and help guide your decision-making process.}