Normally, when taking out a mortgage with a financial institution, the latter imposes several requirements. In addition to direct deposit the salary, pay a minimum of bills and others, among them is the hiring of several insurances, one of them life insurance. The bank itself must also be the 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 entity is that the debt that the client has with the bank be repaid if anything should happen to the borrower, such as death. For this reason, they demand to be listed as beneficiaries.
Similar is the case with the home insurance, since it is most likely that we will be required to subscribe 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. It is possible that they require you to subscribe for 100% of the amount of the debt, or a slightly lower percentage (for example, a couple buys a house, and each one subscribes a life insurance for 50%).
Either way, this debt, as the loan is paid off, 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 capital of the life insurance that you should have, in this link we explain it to you.
Do I have to subscribe only to 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, not only would you cover the possibility of your death, but you would also be guaranteed a capital sum if you were unable to continue working (due to an accident or illness).
If you only take death, the bank is covering its own back; by also taking out disability, you protect yourself.
Do I necessarily have to take out insurance with the bank?
No. They can require you to subscribe an insurance to grant you the mortgage, but they can never force you to do it with them. This is not what we say, it is the law.
Our advice is to compare the quota that remains to us contracting with them the insurances (home, life…) or subscribing them with a Brokerage of insurances. Recently we made an article on the insurances linked to the mortgage.
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 bind you with the mortgage and all the requirements that are linked to it, they put the price they want on the insurance (always higher).
- Because sometimes life insurance costs twice as much with the bank as with an insurance brokerage.
- Because they only offer you their company, and with an Insurance Brokerage you will have access to the products of all the companies in the market.
What do I do if I do not want to have life insurance in the bank?
Whether you already have a mortgage or you 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.
