Cover to protect your mortgage.
Lump sum to clear the loan
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Repayment cover over the period
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Your breakdown
Updates live as you type| Component | Basis | Cover |
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Two different risks, two different covers
Mortgage protection is not one product. It bundles together cover for two separate things that can go wrong, and it helps to keep them apart in your head. The first risk is that you die with the loan still outstanding, leaving your family to either find the repayments or sell the home. A lump-sum life component clears the mortgage in that event, so the house is safe. The second risk is that illness or injury stops your income for a stretch while you are still alive. A monthly benefit covers the repayments through that period so you do not fall behind. This tool sizes both pieces from the same two numbers you already know: your loan balance and your monthly repayment.
It is a needs-estimation tool, not a loan calculator. It does not work out premiums or interest. It tells you how much cover to ask an insurer or adviser to quote, which is the number most people are missing when they walk into that conversation.
Sizing cover for a $450,000 mortgage
Say you owe $450,000 and your repayment is $2,900 a month. The lump-sum piece is straightforward: it matches the balance, so $450,000 of life cover clears the debt entirely. The repayment piece depends on how long you want protection to run. Choosing 24 months of cover means the policy would meet two years of $2,900 repayments if you could not work, which is $69,600 of monthly benefit over the period.
The lump sum dwarfs the repayment cover, which is the usual shape: clearing the whole loan at once is a much bigger sum than meeting a couple of years of instalments.
Do not pay twice for the same risk
The most common and most expensive mistake is buying mortgage protection on top of life and income protection you already hold, covering the same event two or three times over. If you have term life cover that would already clear the mortgage, a separate mortgage life policy is largely redundant. Likewise, income protection that replaces a percentage of your salary already covers your mortgage repayments along with the rest of your bills, so standalone repayment cover may be doubling up. Map what you have before you buy more. The repayment-cover figure here is a useful sense check: if your existing income protection benefit comfortably exceeds your repayments, you may not need this layer at all.
A practical refinement: mortgage protection that reduces in line with your falling loan balance, sometimes called decreasing cover, is cheaper than level cover because the insurer’s liability shrinks each year as you pay the loan down. If the only thing you are protecting is the mortgage, decreasing cover is the efficient choice. Keep level cover for the broader needs of dependants, education and lost income, which do not shrink just because the loan does. One more point worth remembering: ACC may step in for accidents and injuries, but it does not cover illness, so income protection fills a genuine gap that ACC leaves open.
How many months of repayment cover should I choose?
Match it to how long you could plausibly be off work and to any waiting period and savings buffer you have. Many people pick 12 to 24 months on the view that most illnesses or injuries resolve inside that window, while serious long-term conditions are better handled by full income protection or trauma cover. If your only safety net is this policy, lean towards the longer end.
Should the cover be on one life or both partners?
If both incomes are needed to service the mortgage, cover both lives, because losing either income puts the home at risk. A single policy on the higher earner alone leaves a gap if the other partner is the one who cannot work. Joint or dual policies handle this, and an adviser can structure it so the payout lands where it is needed.