Insurance can help cover your bet on the house

Article Category: Demographics

By By Nick Gardner, From: News Limited newspapers, 19 January 2010

WITH three interest rate rises behind us and more forecast for later this year, more homeowners are considering insurance to help them meet their repayments if they fall into financial difficulty.

The types of insurance that property owners and investors should understand include:

1. Income protection insurance, which will pay out a proportion of your income, usually up to about 75 per cent of your last job's salary, if illness or injury prevents you from working.

However, it is a complex area if you take the wrong one you may very well find that it will not pay out when you need it.

2. Lenders mortgage insurance, a requirement by lenders where people do not have a deposit of more than 20 per cent for the property.

LMI covers the lender for the shortfall of the price of the property if the borrower defaults on their loan.

3. Mortgage protection insurance, which can be confused with lenders mortgage insurance potentially a costly mistake. Mortgage protection is a hybrid of income protection insurance and life insurance.

If you're ill or die, the policy pays out, but choose your policy carefully according to your personal circumstances. For example, there is little point taking out any life cover if you are single with no dependents.

In these cases, most people would be happy for their property to be sold and any proceeds added to their estate.

4. Landlords insurance, which is a handy policy to have if your tenants default on their rent or damage your property.

Some will also pay the rent while repairs are carried out if the tenants damaged the property.