This aspect of insurance, depending on who you talk to, will have different meanings. For the most part it is about Life, Trauma and Total Permanent Disability (TPD) insurance specifically tied to your mortgage(s). In recent times with the introduction of Mortgage Repayment Insurance (MRI) this has become a more modern meaning.
In the first instance lump sum products like Life, Trauma and TPD, should be considered for reducing debt in the situations these products cover. Mortgage protection is usually aimed at 100% – 110% of the current balance of your mortgage. We do consider additional factors in our Debt Risk Management Planning that usually means cover requirements are higher than just the outstanding mortgage amount.
The more critical aspect is ensuring your mortgage payment is paid if you are disabled. This situation doesn’t always mean you qualify for either Trauma or TPD so insuring your mortgage payment amount is important.
So you say, “this sounds like income protection”, and you would be right to a point. With normal income protection you have offset of ACC payments for accident related disabilities, with Mortgage Repayment Insurance you don’t have these offsets so you have more certainty that your mortgage repayment will get paid.