More than half (55%) of Australian home loan borrowers would need to sell their assets or rely on the welfare of family and friends if critical illness prevented them from working, or if they were unemployed for three months or longer, according to a study commissioned by ALI Group, a provider of loan protection products for Australian mortgage holders.
The study, which polled a nationally representative sample of 1,000 adults, was conducted by an independent research agency.
The findings shed further light on the topic of mortgages and job loss. Last month, ALI Group released a study that indicated more than half (56%) of Australians rank job security or serious illness as their number one concern among factors that could prevent them from paying off their home loans.
The new study reveals that, in the case of serious illness or job redundancy, one in three (32%) of respondents would be forced to sell an asset, such as a home or investment property, to make ends meet. A quarter of respondents (23%) would be forced to rely on family or friends for financial assistance.
Under 30s are more likely to rely on family and friends for support, with 34% of respondents under the age of 30 seeing themselves doing so in the future.
“Australians do not fully understand the vulnerable financial situation their mortgage puts them in. Serious illness or redundancy can happen at any time and many people don’t realise that their superannuation-held life insurance does not adequately protect their income in the case of illness or redundancy,” said Huy Truong, CEO of ALI Group. “You may only receive $100,000 or $200,000 in cover from your superannuation, and while this might seem like a lot on paper, the reality is that if you are a homeowner with a family, you’ll actually need cover in the $500,000-$1 million+ price bracket.”
The survey also asked respondents if they’d ever seen a financial planner. “Sixty-four per cent had not, and therefore I do not believe they have a plan for such events,” said Truong.
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