/cloudfront-eu-central-1.images.arcpublishing.com/larazon/S62UXGAAJ5HMTHBBVK6DKDG7VE.jpg?fit=%2C&ssl=1 "This is all you need to know about mortgage life insurance")
Buying a home is one of the most significant financial investments in a person’s life, as he will have to face numerous expenses such as acquiring the land, furnishing the property, paying for supplies or even taking out insurance, among others. Hence, all of these elements can greatly increase the final bill that must be paid to own our dream home.
Although taking out insurance can involve a large outlay of money, these types of products are essential for protecting people against possible future risks. In this context, a policy of Mortgage life insurance is an insurance product that financially covers the policyholder in the event of death or disability. In this way it will be the insurance that will pay the insured part of the mortgage, thus maintaining the financial stability of the home and preventing the transfer of the debt to the heirs, in the event of the death of the owner of the property.
Is it compulsory to take out this type of insurance?
The bargain this type of policies It is not mandatory, since Article 17 of the Mortgage Law 2019 prohibits the practice of products related to the granting of mortgages. This is why the applicant for this loan cannot be forced to take out mortgage insurance in order to access a mortgage.
However, this law provides exceptions to this prohibition, as it establishes the following: “l Lenders or real estate credit intermediaries may require the borrower to take out an insurance policy to guarantee compliance with the obligations of the loan agreement (…) In this case, the lender must accept alternative policies from all those suppliers who offer conditions and a level of benefits equivalent to those that the lender would have proposed, both in the initial subscription and in each of the renewals “.
Therefore, banking entities try to do this the loan is granted at the same time as the stipulation of this type of policy, improving the terms of the loan if both products are contracted, as this ensures that the customer also contracts the insurance. This option is implemented to ensure that the mortgage is covered by insurance and that it takes care of the debt incurred by the hypothetical deceased.
Should you take out life insurance with the bank?
Although it will not be necessary to take out insurance with the bank, if you decide to opt for the bank, explains the real estate portal Fotocasa the ways they can sell you this policy:
- As a linked product: The owner must take out life insurance for the granting of the loan, but with the insurer that this person chooses.
- As a bonus product: You can decide whether to contract or not, even if otherwise the mortgage will have a higher interest.
However, taking out this insurance with the bank is often not the best option, as these financial entities usually have a much higher cost. In this sense, the banks offer 91% more insurance than insurance companies, according to the “Comparative Study on Life Risk Premiums 2022” by Inese, a company that brings together professionals from the insurance sector.
Therefore, if a for an average profile, the cost of life insurance of the mortgage it can have a price between 100 and 400 euros per year, this can be increased by more than 90% if stipulated with the bank.
