Income Protection and Mortgage Protecion Insurance

From: Lotana Von Amor

In continuation to a very informative discussion, I have IP insurance, however I am not sure what will I get in case of a claim (and i was not able to get a clear answer from agent or company). I am self-employed through a company structure and pay myself a salary (the total amount is unknown until I sit down with my accountant in July). Let's say the company earns $X pa, but my salary is only $X/2. If I get ill, the company will earn zilch, but the insurance company would probably assume I earn only $X/2 in calculating their payments. Complete nonsense.

On mortgage protection insurance - I have always been under impression that this insurance protects the lander, not the mortgagee. If LVR is high it is mandatory and the bank passes over insurance cost to us. Am I missing something?

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Reply: 1
From: Rolf Latham


Mortgage Repayment Insurance is where an insurer will, under some circumstances continue to make repayments on your behalf should you for example, fall ill.

Lenders Morrgage Insurance on the other hand is the thingy that protects the lender against a shortfall if you default and they sell you up.

The income protection thing for self employed people is usually based on an a declared income and you pay a premium at that level, though yes can be very confusing!


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