Everyone who uses credit to buy a home must buy life insurance. In this way, the financial entity ensures that in the event of disability or death of the loan holder, the debt is paid by the corresponding insurance company.
Considering the mortgage loan as a medium to long-term plan, the amount is high, which will naturally generate doubts in clients. Many of these are related to life insurance. To make the whole process easier, we use the knowledge of our professionals to clarify some frequently asked questions in this article.
1. Do I have to update the principal of the life insurance if it is covered by the moratorium?
Mortgage forbearances have been put in place to address the hardships of households following the COVID-19 pandemic. By postponing mortgage payments (and in some cases interest), households end up paying off their debt later than expected. Additionally, the amount owed to the bank was higher than expected during a particular month of the year.
In most cases, life insurance principal is automatically renewed and reduced in installments. Without this agreement, the value will eventually drift and policyholders must notify the insurance company of the new loan payment schedule.
This ensures that there is enough money safe to pay off the loan in full in the event of death or disability.
2. Am I saving money by taking out life insurance outside the home credit bank?
European legislation does not allow banks to force customers to whom they offer mortgages to take out life insurance from the same entity. Therefore, customers can explore the wide variety of insurance available in the market and find the one that best suits their needs at the most attractive price. For this, you can also count on the advice of an insurance intermediary. In some cases, savings reach 60%.
In any case, you should clarify with your bank whether buying insurance from the entity will bring you any benefits, such as reducing proliferation. If this is the case, and if this is clear from the supporting documents of the deed, it is important that you do the math and understand what it pays you: pay less or pay less for life insurance. Only then can you make a decision.
3. I changed jobs. Do I have to inform the insurer where I have life insurance?
The professional activity carried out is one of the parameters that insurance companies evaluate when contracting life insurance and determining premiums.
Of course, some occupations are more risky than others. For example, let’s compare firefighters to retail professionals. In the first case, there is a higher risk of loss, which may be reflected in the annual premiums paid (and acceptance of certain conditions).
For this reason, in the general conditions of insurance contracts, it is usually stipulated that clients must notify the insurance company every time they change jobs, and they will be penalized for refusing to activate the insurance in the event of an accident.
4. Is the disability coverage the same?
Nope! There is a notable difference between absolute and permanent disability is in Permanent disability for the profession or compatible activity – Expressions with which you have surely come across if you are considering taking out life insurance.
In this previous article on our blog, we explained what each of these coverages is about, so you know when you are really protected.
5. How do I redeem the insurance?
If you need to redeem life insurance (yours or a deceased/disabled family member), the first step is to review the contract and contact the insurance company. But we know that this is not always possible.
If you do not know if a relative has life insurance or with which company they contracted it, you can go to the Supervision of Insurance and Pension Funds (ASF) and request this information.
Next, you must contact the insurance company and submit a series of supporting documents. In case of death, such as death certificates and autopsy reports. In case of disability, among other documents, a medical report is required, which will then be analyzed by the insurance company to verify tolerance.
At DS SEGUROS, as a company specialized in insurance mediation, we understand that all clients must be 100% informed before applying for a loan and signing an insurance contract.
Need help clarifying some life insurance concepts? Do you want to know more about another type of insurance? Talk to us and request a drill. We are partners of almost all insurance companies in Portugal and we are happy to find a tailor-made solution for you at a reasonable price.