Insurance Essentials for First Home Buyers

Buying your first home is a huge achievement and milestone in life! While it’s an exciting time, moving into home ownership and saying goodbye to (sometimes) pesky flatmates, it also heralds the start of a new phase in your life with increased financial responsibilities, which can be daunting. If you have people in your life that depend on you financially, such as a spouse, children or other dependents then your financial responsibilities will now become even greater.

I’ve helped many first-home buyers over the years to understand their risk insurance (life insurance) situation. By identifying the risks and quantifying exactly what the risk equates to in $ terms it is then possible to identify the types of insurance best designed to protect against those risks. Every single person or couple’s situation is different; there’s no ‘one-size-fits-all’, but there are generally a few main areas of insurance that first-home-buyers need to consider.

First: Life Insurance

Once you’ve purchased your first home it’s highly likely that you’ll have a mortgage. For people that have a spouse and/or dependant children and/or other dependant family members they will often want to know that if they were to die that their loved ones won’t be burdened with a mortgage and be put in a position of having to sell their home if they can’t afford the mortgage repayments on the reduced household income. Life Insurance pays a cash lump sum if the life assured either dies, or becomes terminally ill. It’s absolutely the cheapest way to cover this risk and premiums start around $4 - $7 per week for a 30yr old female/male (respectively) for $500,000 of life cover.

Second: Mortgage Protection

If you rely on your income to pay your mortgage repayments (most of us do!), then you really do need to consider Mortgage Protection. If you suffer an illness or injury and can’t work, then you may be unable to continue to earn an income, hence you’ll be unable to pay your mortgage repayments. The options then are to ask the bank for a repayment holiday (that’s not guaranteed), sell your house, sell off some assets to reduce your mortgage or cover your mortgage repayments, use savings (most first home buyers have depleted their savings to buy their first home), or ask the ‘bank of Mum & Dad’ for support! This all sounds very stressful, and you can mitigate this risk by having Mortgage Protection, which means if you can’t work due to illness or injury that your mortgage repayments will be covered and you can concentrate on getting better! Mortgage Protection has the added bonus of not being offset against ACC, which means if you’re off work due to an accident that you’ll receive both your full ACC entitlement and your full Mortgage Protection benefit. Premiums for a 30yr old female and male start from $4 per week for a $2500 monthly benefit. Again, it’s the cheapest way of managing this risk.

Third: Trauma Cover

This cover pays a lump sum cash benefit if you suffer a specified critical illness or injury such as cancer, stroke, head injury, paralysis, motor neuron disease, organ failure, heart attack, major head injury etc. First home buyers generally use all of their cash reserves to purchase their first home, so this Trauma cover means if one of these conditions is suffered you instantly have a cash reserve put into your bank that can allow you the financial freedom to make the best decisions to help you get back to good health faster. This benefit can be used for anything - you decide. It provides a financial buffer at a stressful time and ensures you are in the driver’s seat when making decisions about your health and recovery. Our 30yr olds in this example could have $100,000 of cover for less than $3 per week.

First-home buyers are often from a younger demographic, and consequently their insurance premiums are very cost-effective. So, my advice is to get some advice! It doesn’t have to be hard or complex – just keep these three basic insurance covers in mind and you’ll have yourself a comprehensive base of protection and the peace-of-mind that comes with it!

Bridget Klinac can be contacted on 021 977 924 or at Please note Bridget’s Disclosure Statement is available on request.

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