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How does your property plan fit into your 5-year-plan?

A home may be the most expensive thing you ever buy, but data reveals, it might not be the most important.

Studies from and life insurance company, Noble Oak have shown that some of our biggest life moments – getting married, having kids and buying a home – are occurring one after the other and during this period, more people are taking out life insurance.

Almost two thirds of people surveyed in the Noble Oak Whitepaper in December 2018 said “providing financial security for my family” was the main reason for having taken out life insurance or income protection insurance in the past year.

Of that same group, an overwhelming 72.5% cited buying a home and taking out a mortgage as the biggest life events to prompt them to take out a policy with Noble Oak, followed by having a baby (38.5%) and getting married (25.3%).

But babies, weddings, mortgages… they’re all connected. research shows that, of the 3.7 million people currently in the market to buy a home, people who are married or coupled up are 40% more likely to purchase a property than their single friends. And those expecting a child, or who are planning to marry are two times more likely to buy a home.

This should all come as no surprise, but with some of life’s biggest moments happening at once – or sequentially – stress can come easy, and it’s important to know and understand how to protect yourself, your assets, and your family, as they grow and change.

These are the most important expenses to think about as your 5-year plan comes into fruition.

Life insurance

When you’re having kids, paying off a mortgage and organising a wedding, money and time are fierce commodities. Yet new married (or de facto) couples should never neglect to ask: Do we have life insurance?

“Life insurance protects dependents and loved ones. Marriage is an important symbol of lifetime commitment and dependency to many people. So when people get married, it’s a good time to ensure that each partner has enough life insurance to look after the other one,” explains Noble Oak CEO Anthony Brown. 

“Marriage is also a time when financial obligations, such as a mortgage, become shared. Newly married couples need to be able to ensure that if anything happens to either one of them, they will be able to meet their mortgage, rent or other financial commitments. Life insurance is an investment in your future, which could help to safeguard you and your family,” Brown says.

“Life insurance is the ultimate symbol of commitment. Usually the person paying for it receives no direct benefit from it; it is completely for the benefit of their family and dependents.”

If you’re not sure what type or level of cover you should have, there are a number of online calculators you can use such as the Canstar Life Insurance Needs Calculator or the NobleOak Life Insurance Calculator.

Income protection insurance

For most Australians, buying a home is the single biggest investment they will make. It’s also the biggest financial risk if you are accessing your first home loan or increasing your mortgage.

If you’re in this situation and about to purchase a home, you need to think about how you would cope financially if the main income earner got sick and couldn’t work for a period of time. How would you pay the mortgage and any other financial commitments?

“Having adequate Income Protection cover in place helps to minimise this risk significantly. It not only provides peace of mind at a time of emotional stress, but it provides a financial benefit in the form of an ongoing salary replacement,” explains Brown.

Mortgage protection insurance vs. life insurance

“People should understand the difference between Life Insurance and Mortgage Protection Insurance (MPI). MPI is designed to pay off the debt on your property to the lender only. Whereas Life Insurance pays a lump sum to your beneficiaries and can be used to pay off the mortgage as well as used for other living expenses,” Brown says.

If you’re stuck working out the best value policy that’s right for your circumstances, a great place to start is a comparison website such as Canstar or Finder.

Just look out for the limitations of cover that is only partially underwritten, where only a few questions are asked when applying for cover and pre-existing conditions may be excluded. These types of policies may result in a claim not being honoured. To avoid this happening, always read the Product Disclosure Statement (PDS) thoroughly to understand what is and isn’t covered.

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