You buy a house for $750,000 with a large mortgage. Your neighbour buys the house next door for the exact same price and with the same sized mortgage.

But while you took out relevant insurances, your neighbour just took out enough life cover to match the exact amount of his mortgage.

Without warning, both of you have severe heart issues on the same day that result in having to take six months off to recuperate.

Your neighbour has his lender agree to relax the repayments while he was off work. You on the other hand kept paying the mortgage and didn’t notice the difference.

The end result is that your neighbour’s mortgage was extended in its repayment years and total interest. Yours actually came down quite substantially due to making a lump sum payment on it from your insurance pay-out. (No, you don’t have to die to collect insurance)

If something goes wrong, the bank will either want their money back or to come to an arrangement that adds years to your mortgage.

It is easy to simply agree with the lender on insuring your mortgage, but it may be that you have the wrong sort of insurances for your personal circumstances. I can review your insurances for free, so why not ask. It could save your house.