Better safe than sorry: the value of property mortgage insurance

You've finally done it. After years of saving, planning, and perhaps a few sleepless nights, you're ready to get the keys to your dream home. It's a moment of true joy and accomplishment. But with this newfound happiness comes a significant responsibility: protecting your investment. Life can be unpredictable, and sometimes, unexpected events can disrupt even the most carefully laid plans. That's where property mortgage insurance can be a valuable safety net. 

What is property mortgage insurance?

A home loan will ensure you have a roof over your head, but it also becomes a significant responsibility. If you are unable to meet your monthly payment, this insurance comes to the rescue. In the unfortunate event you suffer a death, illness, injury or disability, or loss of income through retrenchment, this insurance will help you pay your monthly bond instalments and even settle the amount in full. This ensures your asset and your family's livelihood are protected. 

In the search for this insurance type, you'll find a variety of names like mortgage debt protection cover, bond coverage insurance, and bond protection plans. However, they all have the same goal of securing your bond payments. Most major banks and financial institutions offer coverage in South Africa and include Standard Bank, FNB, Nedbank, and Absa. 

How much does property mortgage insurance cost?

There typically isn't a 'one-size-fits-all' approach to pricing. Insurers will consider risk rating factors like your age, gender, employment status or income, health, as well as the size of your home loan. In this way, you'll only pay for the unique level of risk appropriate to you.

Is this cover compulsory for a bond?

While property mortgage insurance isn't compulsory, most financial institutions will require it when granting a bond. This ensures they are protected in the event you are unable to pay off your loan. This can sound unpleasant to think about, but it's worth it for insurance that will give you peace of mind. 

Benefits of property mortgage insurance

It can be easy to shrug it off as just another insurance to pay, but this can provide great benefits even when it's not made a requirement by your home loan provider. 

• Have a sense of relief: Knowing that you have bond protection insurance can alleviate the stress and worry associated with financial uncertainty, allowing you to focus on other aspects of your life. A loss of income, for example, is a reality in a difficult economic climate and having this insurance can be a great help in the instance this happens. 
   
• Protection against unforeseen events: Life can be unpredictable, and bond protection insurance safeguards you against unexpected circumstances such as death, disability, or retrenchment that could jeopardise your ability to pay your mortgage.
   
• Financial safety net: In the event of a covered claim, the insurance provides a lump sum payment that can be used to cover your mortgage repayments, preventing you from losing your home.

How does property mortgage insurance work?

While your home loan provider can request that you sign up for this insurance, you don't have to sign up for the insurance with them. You have the freedom of choice to shop around and take a policy with another registered insurer who fits your budget and needs.

When applying, more than one bondholder can be insured under the policy. The policy premium you pay is conveniently managed off your home loan account. And a positive aspect is that the bond reduces as you pay it off, so your premiums decrease. In the instance you make a valid policy claim, these are paid directly to your home loan account.

Tips for choosing property mortgage insurance

Like any other insurance type, it pays to do your research and think carefully before signing on the dotted line. Here's what to keep an eye out for during the process:

• Research potential insurers: With insurance, customer service matters when getting clarity on policy terms or making a claim. Search reviews on sites like HelloPeter and see what customers are saying specifically about their bond protection insurance. You can also look up "best of lists" to explore customer sentiments towards major banks. 
   
• Shop around for a deal: Because you aren't obligated to take your insurance with your home loan provider, you should get multiple quotes. Consider the premiums expected and ensure the package you choose provides the coverage you need. 
   
• Think before you ink: Don't feel pressured into signing any contracts. Read policy documents, ask questions, and always know your rights. Having a good grip on the fine print can save you a costly mistake in the instance your event claim is not covered. This can include policy coverage, exclusions, waiting periods, and claim procedures.
   
• Speak to a professional: As this can impact your home loan payment experience, you can also speak to a qualified financial advisor who will ensure you're making a sound decision. 

The first step in your homeowner journey

There's much to consider when signing up for property mortgage insurance. Fortunately, the initial steps of finding a home and getting through the purchase process can be easy with the right real estate agency. Kellaprince Properties prides itself on making the experience as effortless as possible. We boast a team of experienced professionals ready to help and a range of property stock that is sure to fit your needs. Get in touch today to get started.