Can I Get a WINZ Benefit if I Have Private Mortgage Insurance?

This is certainly a relevant question, as a report out last week from the Financial Services Council lamented on how financially unprepared most Kiwis are in the event of disability.

It's also a question that most insurance advisers will skirt around, however the legislation does cover entitlements a person can claim from both WINZ and a private disability insurer. The findings may surprise you and it's not quite as black and white as it may seem.

The simple answer is yes, according to the Social Security Act 1964 you can claim a WINZ Supported Living disability benefit if you have mortgage insurance. However you may not claim a WINZ Accomodation Supplement if the mortgage insurance payment exceeds the value of the supplement, which will almost certainly be the case.

So how much can one receive from Mortgage Repayment Insurance if on a WINZ Supported Living Benefit? The Act says you can get a Supported Living Benefit and you can receive mortgage repayment insurance. Not bad, huh?

Some Insurers have renamed Mortgage Protection Insurance to Mortgage and Living Insurance or something similar, the latter being intended as an income replacement product as opposed to a mortgage protection product. 

So long as the insurer provides this cover to you as a mortgage protection insurancethen you should still be eligible for the Supported Living Benefit, in addition to this income, so long as the income received would reasonably cover the costs of the mortgage and essential repairs and maintenance, local authority rates, and house insurance premiums.

It is not clear how the Act would treat income received from a mortgage protection policy that provided a surplus after these costs were covered. Given that some mortgage protection policies now pay out 45% of gross income we're getting into a grey area.

The devil may be in the detail and WINZ’s websites says they only need to know if you get mortgage protection insurance if you are applying for an accomodation supplement. The legislation and the summary on WINZ's website assumes that these payments are to cover the mortgage and related property ownership costs. However the private insurers have now expanded the definition of mortgage repayment insurance to include insurable income equivalent to 45% of a claimant's gross income, which in most cases would provide a surplus once property costs were deducted. But maybe not if you had to re-roof, re-plumb, re-pile and re-paint, which are considered essential repairs and maintenance under the act. Messy, isn't it?

It definitely pays to know your entitlements because a Supported Living Benefit for a single parent pays $20,020pa net of tax and for a couple with kids $25,064pa. Add on mortgage repayment insurance, say $45,000pa tax free, and you could be in a very comfortable position. The relatively low cost of this type of cover makes it an attractive option if one can also qualify for WINZ assistance.

About the author - Bruce Millner is the Director of a Wellington-based insurance business specialising in disability income protection insurance. The information in this article is the opinion of the writer and does not constitute financial advice. You should make your own enquiries and talk to a Registered, QFE or Authorised Financial Adviser. bruce@yourlife.co.nz

References

https://www.workandincome.govt.nz/on-a-benefit/tell-us/income/insurance-payments.html

http://legislation.govt.nz/act/public/1964/0136/latest/DLM363168.html?search=sw_096be8ed8188d156_*mortgage+protection+insurance*_25_se&p=1#DLM363168

http://legislation.govt.nz/act/public/1964/0136/latest/DLM362802.html?search=sw_096be8ed8188d156_*mortgage+protection+insurance*_25_se&p=1#DLM362802

https://www.workandincome.govt.nz/map/deskfile/main-benefits-cut-out-points/supported-living-payment-cut-out-points-current.html

https://www.fsc.org.nz/bulletin_display/x_blog_code/2081/cat_start_cust/00466.html