We continue with this thread of posts that we started a few weeks ago… Then we talked in general terms about the insurance with which banks link mortgages to customers, and what were the main mistakes they made, today we will analyze these products and how to undo these “ties” imposed by financial institutions.
Legislation on “mandatory” bonding
There are already several consultations with the Directorate General of Insurance on these issues, which attest to what are considered to be the following “facts contrary to good practice and usage in the field of private insurance”.
In fact, in 2014 a Community Directive was enacted in the European Parliament known as the “Mortgage Directive”, which prohibits abusive clauses in financial product contracts, including the obligation to link an insurance policy with the bank when signing the mortgage contract.
The problem is that it is taking a long time to transpose it into Spanish law, due to the multiple banking interests in this matter.
NEW (JUNE-2019): this abusive practice no longer exists. In new mortgages they can no longer give us a bonus when subscribing insurance with them, giving us real freedom to choose the provider we like the most.
Home Insurance
We have already seen that this policy was intended to act as a guarantee for the bank that the loan granted will be repaid, even in the event of any serious loss to the home.
Legally, there is no obligation for the bank’s client to take out this insurance; in any case, it is a contractual obligation.
Life Insurance
It usually covers only the death of the insured, so it serves as a guarantee for the bank that, if any misfortune happens to the borrower, the money he/she lent will be returned to him/her.
The same as we have said about home insurance applies here: legally, there is no obligation for the bank’s customer to take out this insurance; it can only be imposed contractually.
How can we get rid of these “ties”?
Let’s look at the two essential steps to improve our current conditions:
Check the mortgage loan deed
We must look for the clause where the interest rate applicable to the mortgage is stated. It should appear how the fact of having subscribed these insurances with the entity lowers the rate. Two things can happen:
- If it does not say anything: then it is as easy as cancelling the expiration date and going for an option that satisfies you more.
- That says that 0._% is added to the rate applicable to your mortgage. Then we go to the 2nd thing to do.
Calculate the cost of other home and life insurances
We must check if what the bank is charging us is in line with the market price. In the same way that if the guarantees that we have are those that we need. The practice that we have contrasted is even of home insurances without the coverage of disability or life insurances without the coverage of disability.
We must check whether:
- With the savings in insurance costs,
- Improved policy coverage (such as: better home insurance, a mediator to defend you in the event of a claim, or including disability coverage in life insurance), and
- In spite of the increase in the cost of the monthly mortgage payment
We are compensated for the change of our insurances to be managed by a broker.
We leave you again the calculator that you can use to see if in your particular case it is worth it or not.
There have already been independent studies that corroborate that life insurance is much more expensive at the bank than at other independent companies.
At Moné Seguros e Inversión we will prove with you that in more than 90% of the cases, it pays off.
