Paying off your mortgage is one of life’s biggest financial achievements, so if that’s you, congratulations! It represents the decades of hard work, careful budgeting and countless repayments.
It is also the point where many people ask if they still need insurance, and it’s a fair question. After all, if one of your biggest financial commitments has been wiped, surely your need for protection should too? Not necessarily…
The reality is that becoming mortgage free doesn’t remove financial risk, it often changes what you are left protecting. What we mean by this is, the mortgage payments may be gone, but your financial responsibilities haven’t. Rates, home insurance, home maintenance and repairs, general household expenses, supporting family members, travel and lifestyle, retirement, healthcare, your partner’s future financial security – all need accessible cash.
A mortgage free home usually has the wealth tied up – valuable on paper, but not so financially resilient should you need access to life’s unexpected events. If you’re in your mid 50’s you could still have another decade of earning ahead of you and in that time, your income may still be funding such things as:
- KiwiSaver contributions
- Additional investments
- Travel
- Home Improvements
- Children (University / first home)
- Your desired lifestyle
If these years were interrupted, it could require you to borrow against your home again, sell your property, or changing your retirement plans.
Net worth doesn’t always equate to financial resilience
Your financial protection plan is determined by your overall picture, whether you could comfortably meet expenses without income.
It’s time for a review, not remove
The good news is being mortgage free has put you in a great position to review now that your life has changed. It’s about understanding how the right insurance and financial planning can be best planned, to protect your next stage of life.