Inbuilt risk insurance for NAB mortgages
A 34 year old male non-smoker who borrows $250,000 to buy a home will have his mortgage repayments covered in the case of illness or involuntary unemployment if he adds an extra $84.52 to his usual monthly repayments under the National Australia Bank’s new protected loan product.
MLC chief executive Steve Tucker said the launch of what NAB has dubbed Protected Loan, the premium for which vary depending on age, gender and smoking status, would help tackle Australia’s underinsurance crisis.
NAB is also hoping the integration of a loan product with an insurance product will boost cross sales with MLC, which Tucker conceded were low.
He flagged that MLC and NAB would release several more combined products in the near future.
“Australians have a one-in-three chance of becoming disabled for more than three months before turning 65,” Tucker said.
“Statistics also show that 60 per cent of Australian families with dependants will run out of money within a year if the breadwinner dies.
“Despite these facts, the majority of Australians have some level of home and contents insurance, but very few have income protection, total and permanent disability (TPD) or life insurance.”
Tucker said TPD and term insurance products would still be sold separately by bank-based financial planners through referrals.
But the new protected home loan will be sold by branch bankers.
Tucker said the NAB product would hold its own against other unemployment and mortgage protection products offered by separate providers because it is competitively priced, simple for the customer to understand, and is offered at a time when they are most likely to be conscious of the importance of taking out life insurance.
He did admit though, that there might be cheaper, stand alone, mortgage protection products on the market
Protected customers with legitimate claims will be offered up to $5,000 a month, or in the case of death, a flat payment of $400,000.
Premiums for a female non-smoker are higher, with a $100.40 monthly premium required for a $250,000 loan.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
