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Is your home loan cover enough?

27 Aug 2013

It is disturbing how often the surviving spouse in a marriage, usually the wife, is forced to sell the home to meet outstanding bond payments when the breadwinner dies.  

Klopper says a mortgage bond policy is often a great deal less expensive than a comprehensive life insurance policy.

This is according to Daphney Klopper, Rawson Property Group’s franchisee for Table View and a co-franchisee for Parklands, who says quite often, the sum raised by the sale of the home is insufficient to enable the surviving spouse to buy again, even at a much reduced price level, and then she becomes a tenant in perpetuity. 

In days gone by, Klopper says this almost never happened because the bank granting the bond would insist on the borrower taking out sufficient life insurance to repay the whole bond and to have something over on which to live. 

Nowadays, however, she says the banks, in an effort to make home buying more affordable, will often insist only that the structure of the home is insured. 

She says it is absolutely essential that an insurance policy or mortgage protection is taken out the moment a bond is granted – and that this has to be equal to the full bond amount. Such ‘mortgage insurance’, she says need not be expensive - it can cost less than R200 per month on a R1 million bond. 

Klopper says a mortgage bond policy is often a great deal less expensive than a comprehensive life insurance policy. 

She says due to the fact that this type of insurance always went hand-in-hand with a bond award in the past, there are still many people who assume that such policies are still in place, even though they are not. 

There are also others, she says who are not aware that the bank’s insurance policy on the house will usually expire when the bond is fully paid. If then the house burns down or is wrecked in a storm, they will find that they are no longer insured. 

Klopper says couples with any doubt on this matter should check their insurance policy right away to make sure that in the event of the breadwinner’s death or other problems incurred in the home, the surviving spouse will not suffer. 

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