Explore Income Protection

We do not currently offer any mortgage protection products through our comparison service. However, if you’re interested in mortgage protection insurance, you might also be interested in income protection. Learn more here.


Joshua MalinWritten by Joshua Malin
Reviewed by Lana Hambilton
Last updated 21/02/2024

Key takeaways

What would happen if you were suddenly unable to make your home loan payments due to an involuntary loss of employment or a serious illness?

Luckily, most lenders offer mortgage protection insurance, which allows Australians to sleep well at night knowing that their repayments are protected against unexpected events. But how do you know if mortgage protection is right for you? Here are some things to consider depending on your individual circumstances:

  • A mortgage protection policy could payout if you’re unable to pay your mortgage repayments due to death, involuntary unemployment, a serious injury or illness and more.
  • If you’re considering mortgage protection insurance, you might also want to consider an income protection. policy
  • If you’re buying a home in Australia, you might also need to take out lenders mortgage insurance as a condition of your home loan.

What is mortgage protection insurance?

Mortgage protection insurance (also known as home loan insurance or consumer credit insurance) may financially protect the homeowner from falling behind on their repayments in difficult circumstances. Mortgage protection insurance can be taken out on both residential and commercial properties. It’s also available for owner-occupied and investment property loans.

Mortgage protection insurance isn’t compulsory. That said, it may be worth having as a fallback for your loved ones if they’re suddenly left without your income. It can provide either an ongoing payment or lump sum to help you and your family keep up with your mortgage repayments.


How it works

Couple take out mortgage protection insurance

How do mortgage protection payouts work?

Mortgage protection insurance can help pay your mortgage for a certain period if you’re unable to make repayments if you are unable to work due to sickness or injury or other circumstances covered by the policy. Mortgage protection insurance may also pay a lump sum benefit in the event of death or another event covered by your policy. When you make a claim, you or your listed beneficiary will receive a payout as stated in the policy.

In the event there is a claim for death or terminal illness and the policy terms are met, the benefit (paid in a lump sum) will typically be paid directly to the relevant loan account. If there are any residual amounts remaining when the loan is paid out, the residual amount would be paid to you, your estate or another beneficiary.

If you’re made redundant involuntarily or are temporarily unable to work due to a serious illness or injury, mortgage protection insurance can help you keep on top of your home loan repayments.

What does mortgage protection insurance cover?

There might be slight differences in the coverage that different insurers provide, but generally, most mortgage protection insurance policies will offer a payout for the following circumstances:

  • Death or diagnosis of a terminal illness
  • Involuntary unemployment
  • A serious illness or injury that prevents you from working.

You can view the details of what’s covered by mortgage protection insurance in the applicable Product Disclosure Statement (PDS), which is one of the key disclosure documents you get when purchasing a product. You should read the PDS before purchasing to know exactly what you’re paying for.

What does mortgage protection insurance exclude?

Like most types of insurance, there are some exclusions to be aware of. These may include and are not limited to:

  • Voluntary redundancies
  • Any injury or death that’s the result of illegal activity or reckless behaviour
  • Any serious illness that’s a pre-existing medical condition or caused by a pre-existing medical condition (such as cancer or a knee injury).

Details of the specific exclusions for each insurance policy can be found in your PDS.

What can influence my mortgage insurance premiums?

The following factors can all influence your mortgage insurance premium:

  • Single or joint policy. If you hold a single policy, your income is a factor that influences the cost of your premium. However, should you take out a joint policy with your partner, both your incomes are relevant and will be taken into consideration when calculating your combined premium.
  • Loan amount. Your premium will be influenced by your loan amount and specific coverage amounts selected.
  • Your age. Your age at the policy commencement date is factored into the calculation of your premium.


Other types of cover

Mortgage protection insurance vs income protection

An income protection policy can offer up to 70% of your income in the event you’re unable to work due to illness or injury. It offers more flexibility in protecting your lifestyle as opposed to just your home loan.

Conversely, mortgage protection insurance can pay you out in similar circumstances, but the payments go directly to your home loan instead of your back pocket.

While income protection insurance is offered by most insurers, not all lenders offer mortgage protection insurance.

Income protection and mortgage protection insurance have different purposes. Both products have their own benefits and could provide you with the invaluable peace of mind that comes with knowing you’re covered. The suitability of either of these products will ultimately depend on your own personal circumstances and insurance needs, which should be taken into consideration.

Through our income protection insurance comparison service, you can weigh up your options from the providers on our panel at no cost to you. It only takes minutes to complete a quote, so why not see if you can safeguard your income through us today?

Mortgage protection insurance vs. lenders mortgage insurance

There is often confusion between mortgage protection insurance and lenders mortgage insurance. Some might think lenders mortgage insurance is designed to protect the homeowner in case of loan default. However, that is not the case.

Lenders mortgage insurance (LMI) is a policy that a lender may require a borrower to take out to insure itself against the risk of not recovering the full loan balance from the borrower (i.e. if you can’t pay off your loan). In other words, it covers the lender, not the borrower.

Mortgage protection insurance, on the other hand, covers you the borrower. It’s a lump sum payment (or ongoing payments made to cover the loan repayment amount for an agreed period) that your insurer pays to you when you can’t repay your mortgage and meet the terms outlined in the PDS. This can happen, for instance, if you lose your employment involuntarily, are temporarily or permanently disabled or pass away.


The pros and cons of mortgage protection insurance

Family relaxes in new home with mortgage insurance
Like many financial products, mortgage insurance has a number of key benefits and drawbacks:


  • Peace of mind. Your policy can pay out your loan and residual amounts can be paid to your estate should you pass away.
  • Premium discounts. Providers may offer premium discounts for joint policies.
  • Fast application process. There are no medical evaluations or blood tests required to apply for a mortgage insurance policy.


  • Your policy may only pay out once. This means you or your dependants will only receive a single benefit when a claim is made.
  • Less flexible than income protection. Mortgage protection insurance covers fewer events and offers fewer additional features than income protection.


More information

Who is eligible for mortgage protection insurance?

To be eligible for mortgage protection insurance, you’ll first need to have a home loan or have applied for one. This means you’ll also need to pass the lending criteria and secure your finance.

Another eligibility criterion for mortgage protection insurance includes having a minimum level of cover for specific benefit types (e.g. at least $100,000 for a death or terminal illness benefit). Keep in mind this may change between lenders.

Is mortgage protection insurance tied to my home loan?

Your mortgage protection insurance may be tied to your home loan, but some lenders keep it separate. The difference for borrowers is that should you refinance or make other loan changes down the track, you may need to go through some additional paperwork to keep your mortgage protection insurance depending on the terms and conditions of your policy.

If your lender offers mortgage protection separately from the mortgage, you typically don’t need to worry about it even when refinancing.

Can I get mortgage protection insurance if I’m self-employed?

You can get mortgage protection insurance if you’re self-employed, but there may be additional criteria that will need to be met. For example, you may need to provide proof of a regular income for one or two years prior to your home loan application, compared to the past three or six months required for other employment types.

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