Mortgage Protection: The Most Overlooked Part of Your Home Loan

When most people think about getting a mortgage, their attention goes straight to interest rates, loan structure, cashbacks, and how quickly they can pay the loan off. Those things matter, of course but they aren’t the biggest threat to your home.

The real risk is something far more personal: your ability to earn an income.

That’s where mortgage protection comes in, and why it deserves just as much attention as your loan itself. Yet it’s one of the most commonly overlooked parts of the home-ownership journey. Many homeowners don’t fully understand what it covers, why it matters, or how quickly things can unravel without it.

This isn’t about fear – it’s about stability, protection, and making sure your home stays your home no matter what life throws your way.

So, what is mortgage protection?

Mortgage protection is an insurance policy that covers your home loan repayments if you can’t work due to illness, injury, or in some policies, redundancy. If something unexpected stops your income, the policy steps in and pays the lender on your behalf. Your home loan keeps ticking along, your credit rating stays intact, and you get the breathing room you need to recover.

Many people assume that because we have ACC in New Zealand, they’re automatically covered for anything that takes them off work. Unfortunately, that’s a common misconception. ACC only covers injuries caused by accidents. It does not help you if you’re taken out by illness – and illness is by far the more common reason Kiwis stop working.

Cancer, heart conditions, chronic pain, surgery recovery, stress-related conditions… these are far more likely to impact your ability to earn than slipping on a ladder or having a car accident.

This gap between what people think they’re covered for and what they actually are covered for is exactly why mortgage protection exists.

Why income is your biggest financial asset

Your mortgage is based on one major assumption: that you can continue earning. Everything depends on that – your repayments, your household bills, your long-term plans, your lifestyle. When that income disappears even briefly, the ripple effect is immediate. Savings get used up faster than expected. Sick leave runs out in a matter of weeks.

Families step in, but only for so long. And if the unexpected drags on for months rather than weeks, suddenly you’re staring at missed repayments, arrears, and growing interest.

For many families, the mortgage is the biggest monthly commitment they have. Losing the ability to pay it – though no fault of your own – is an incredibly stressful situation. Mortgage protection removes that pressure. It turns a potential financial crisis into something manageable.

The reality: things change faster than you think

Most people don’t plan to get sick. They don’t expect to be injured. They don’t imagine needing months off work. Life just has a way of surprising you – sometimes gently, sometimes harshly.

A sudden diagnosis. A sporting accident. A surgery that turns into a longer recovery. Burnout. Mental health challenges. A shock redundancy. These things don’t just happen to “other people.” They happen to everyday New Zealanders all the time.

We see it often: people who thought they’d bounce back in a week end up needing two or three months off. People who planned to use savings discover those savings barely cover a few weeks of expenses. And when your mortgage is due every fortnight, there’s no room for long delays.

Mortgage protection acts as a buffer between you and that financial cliff edge.

What happens if you don’t have mortgage protection?

Without it, you’re relying entirely on your personal resources:

• Sick leave (usually limited)
• Annual leave (meant for rest, not emergencies)
• Savings (which disappear quickly)
• Family support (not always possible or comfortable)

If those run out and you still can’t work, the next steps become far more serious. Missed payments lead to arrears. Arrears lead to additional interest, default notices, and stress that affects every part of your life. In the absolute worst cases, people lose their home – not because they were irresponsible, but simply because life blindsided them.

Mortgage protection exists to stop that chain reaction before it begins.

Choosing the right cover matters

Not all mortgage protection policies work the same way. Some cover redundancy; some don’t. Some pay the lender directly; others pay you. Some allow partial returns to work; others require full absence. And the benefit amounts and waiting periods vary widely.

This is why getting advice is so important. A good adviser won’t sell you a policy – you can buy insurance online in minutes if that’s all you wanted. An adviser will assess your household, your income, your mortgage, your risk level, and your budget, then recommend a policy that actually protects you properly.

You don’t want to be underinsured, but you also don’t want to pay for cover you don’t need. It’s about the right balance, tailored to your life.

What does this all mean?

Mortgage protection isn’t just insurance. It’s peace of mind. It’s the safety net that lets you focus on getting better instead of worrying about repayments. It’s what keeps your home safe when the unexpected happens. And it’s one of the most important conversations any homeowner should have.

If you’re not sure what you’re covered for – or whether your current policy is even still fit for purpose – talk to our team at The Mortgage Hub. We’re here to help you understand your options, make smart decisions, and protect the home you’ve worked so hard for.

And if you want an easy explanation of how mortgage protection works, watch this video by Royce Prithcard, qualified financial adviser at The Mortgage Hub.