What happens if my income stops and I can't service my debt?

The answer to this question can best be demonstrated by looking at the financial circumstances of the average Australian family in 1994. With interest rates the lowest they've been in years, many families are focused on paying off their own home as quickly as possible.

For example, a couple may be trying to reduce the term of their loan by paying an extra sixty dollars each week. If one partner get sick, or loses their job, they may be placed in the position where there is no redeemable asset base to turn to but their own home.

If that same sixty dollars a week were invested in a second house the risk may actually be diminished. The advantage of investing in a redeemable asset base is that, if something happens, the family house is not put on the line - there is something else to turn to.

Life or trauma insurance and income protection policy will replace 75% of a person's regular income while that person is unable to work.