Mortgage protection vs income protection insurance: Key differences

Mortgage insurance vs income protection

Key differences between income protection and mortgage protection

1. Benefit amount

Mortgage protection benefits are calculated based on your mortgage or rent payments or your income. Maximum monthly benefits can go as high as 115% of your rent or residential mortgage repayments, or up to 45% of your income (with a few insurers covering up to 75%).

In contrast, income protection benefits are calculated based solely on your income. It typically pays up to 75% of your earnings monthly, which is higher than the cover offered by most mortgage protection insurance.

2. Offsets

Mortgage protection policies do not generally offset payments received from sources like ACC, employer leave payments, and benefits from other types of insurance. This means you can receive your insurance benefits without deductions.

Income protection benefits are reduced by other payments received for the same illness or injury. These could include ACC payments, employer sick leave, or benefits from additional insurance policies, such as mortgage protection.

Combining mortgage and income protection

Having both mortgage protection and income protection offers comprehensive financial security. For example, mortgage protection ensures your residential mortgage or rent gets paid, while income protection supports your day-to-day living costs. A combination can be especially helpful if you have dependants or significant financial commitments. 

Policywise will typically recommend combining both plans if it fits your circumstances. Doing so maximises the benefits you can receive in case a serious illness or injury prevents you from working.

Sample scenario:

Sarah, an engineer, decided to take out both mortgage repayment insurance and income protection insurance. Later on, Sarah was diagnosed with cancer and was forced to stop working due to related issues.

After a waiting period of four weeks, Sarah’s mortgage repayment insurance kicked in, providing $2,500 a month to cover her mortgage. Simultaneously, her income protection insurance began paying $4,600 a month, covering most of her living expenses, including groceries, utilities, and childcare costs for her two children.

This combination of mortgage and income protection insurance meant Sarah could focus on her treatments and recovery without worrying about her finances.

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Let Policywise assess your needs

Mortgage and income protection insurance are two policies designed to provide financial security during life’s unexpected challenges. They work well together in providing comprehensive cover, but understanding the differences and how they align with your financial goals can be complex. The expert guidance of a trusted broker, like Policywise, can help you plan. 

Policywise is a 100% free service that tells you which health and life 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 and quotes, 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 mortgage and income protection insurance sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.

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