Normally, when subscribing to a mortgage with a financial institution, The new law imposes a number of requirements. In addition to having your salary paid directly into your bank account, paying a minimum number of bills and so on, they also include taking out various insurance policies, one of them being the insurance of life. The bank itself must also be listed as beneficiary, and this is what we will talk about in this post.
Why are we “forced” to take out life insurance?
The objective pursued by the financial institution is that the debt that the client has with the bank is repaid if anything should happen to the borrower, see death. For this reason, they demand to be listed as beneficiaries.
Similar is the case with home insurance, as we will most likely be required to take out one in case something happens to the property.
How much capital should I have in my life insurance policy?
It depends on what the bank requires by contract. They may require you to take out 100% of the amount of the debt, or a slightly lower percentage (e.g. a couple buys a house, and each takes out a life insurance policy for 50%).
Either way, this debt, as the loan is repaid, is reduced. Our life insurance can follow the same evolution or maintain the capital, so that if we opt for the latter, we should declare our family members as beneficiaries, for the part that does not correspond to the outstanding debt. If you want to know the life insurance capital you should have, in this link we explain it to you.
Do I only have to take out the death guarantee?
You don't have to. You can choose whether you want to take out the death benefit only, but you could also take out the disability benefit.
In this way, by also taking the disability guarantee, you would not only cover the possibility of your death, but you would also be guaranteed a capital sum if you were unable to continue working (whether due to an accident or illness).
If you only take the death, the bank is covering its back; by also taking out disability insurance, you protect yourself.
Does the insurance have to be taken out with the bank?
No. They can require you to take out insurance in order to grant you the mortgage, but they can never force you to take out insurance with them. This is not what we say, but what the law stipulates.
Our advice is to compare the amount that you can get by taking out insurance with them (home, life...) or by signing up with an insurance broker. We recently wrote an article about the mortgage-linked insurance.
Why should I compare?
It is always good to have several options to choose from, but in this particular case even more so:
- Because as they tie you to the mortgage and all the requirements that come with it, they put the price they want on the insurance (always higher).
- Because life insurance sometimes costs twice as much with the bank as with an insurance broker.
- Because they only offer you their company, and with an Insurance Brokerage you will have access to the products of all the companies on the market.
What do I do if I don't want to have life insurance with the bank?
Whether you already have a mortgage or are about to apply for a loan, our advice is to compare what you have just read. If you want us to help you in the process, and get the best life insurance, please contact us.
