When signing a mortgage, it is recommended to take out life insurance against possible misfortunes. As we’ve explained, unexpected circumstances can get in your way and cost your family some or all of your income.
However, this type of employment, while desirable, is not legally required. The law also does not allow the financial institution that grants the loan to force you to buy life insurance from a company.
The purchase of life insurance related to the mortgage loan is not mandatory
Spanish law does not require you to have life insurance to qualify for a mortgage. But the truth is that many banks require the contracting of this type of protection as a necessary condition for granting credit. In some cases, the requirement even goes so far that life insurance related to real estate credit must be contracted with a specific insurance company designated by the bank, a link prohibited by the Spanish Real Estate Credit Law of 2019.
In addition, according to the Portuguese National Association of Insurance Agents and Brokers APROSE, in the case of Portugal, the country’s legislation does not require the contracting of any insurance to obtain a mortgage.
Let’s look at some data related to Spain, from a study prepared by the General Council of Insurance Intermediaries in May of this year: some seven out of 10 people who apply for a home or consumer loan are not informed by the bank of the possibility of contracting Sex and Insurance insurance: For mortgages, insurance is a necessary condition in 74% of cases, since the loan must be formally granted.
Therefore, it must be taken into account that, given the bank’s requirement to take out life insurance related to the real estate credit from an insurance company in order to obtain a mortgage loan, the client may refuse. And, if the strategy of the financial entity is more subtle, such as improving the conditions of the loans, signing the aforementioned life insurance in relation to home loans with the entity in advance, the user has a real margin of maneuver , guaranteeing that according to the law, finding the life insurance related to the Mortgage for people whose budgets and needs are not preferred by the banks.
In the Portuguese market, the situation is similar: captive sales are prohibited by law, Portuguese insurance intermediaries comply, and borrowers can purchase real estate credit life insurance with the insurance company of their choice. However, the conditions of the loan may vary depending on the relationship between the client and the entity that grants the credit more or less, or the sale of the product in question. APROSE’s defense in this matter is that if a borrower chooses to purchase life insurance in connection with a home loan from an insurer or intermediary of their choosing, they are prohibited from worsening credit conditions, unless it is the financial institution who granted the loan.
let’s do the math
It is a matter of calculation, because although negotiating these coverages with your bank may seem beneficial for your payment, it may not be, and on the one hand the low cost adds to the cost. According to another study, this time prepared about two years ago by the specialized insurance publishers Inese and Global Actuarial, life insurance premiums in a Spanish bank are, on average, 48% higher than those of insurers. These differences are especially pronounced in the profiles of younger customers.
So stop being lazy and do the math to see what’s most important. If it is difficult for you to do these types of calculations, or you are afraid of being wrong, remember that there are experts who will take care of you: be yours. An insurance broker like you, a trusted insurance company, can help you in this matter. The final decision on whether to purchase home loan related life insurance or which company to partner with will always be in your hands.
Since a home loan is a multi-year bond, it’s important to take all of these variables into account: a small monthly difference can become a significant number over the years. Do not forget that both banks and notaries work for you and must clarify all your doubts. Do not sign anything without being fully convinced or carefully reading all the text that contains the fine print.
