Mortgage credit life insurance: How does it work?
When hiring a home loan, you come across the requirement to also subscribe to a life insurance policy. But why is it necessary to associate this insurance with the loan and how does this product work?
Why am I required to have a life insurance for the housing credit?
So that you can hire a housing credit, banks require you to subscribe to two insurance policies: life insurance and multirisk insurance.
This is a mandatory step to finalize the process, as it is a way for banking institutions to protect themselves.
Regarding life insurance, the objective is for the insurer to be responsible for repaying the loan, if the client is unable to pay the amount to the bank.
Depending on the chosen coverage, in case of death or disability of the borrower, the bank becomes the creditor in the insurance policy.
In other words, by advancing life insurance as collateral for home loan credit, the entity can offer a lower spread (rate that measures the level of risk).
Can I purchase insurance outside the bank or transfer later?
As a rule, banks suggest that you take out insurance with the associated insurer. But this is not a mandatory procedure.
According to Decree-Law No. 222/2009, which establishes rules on the conclusion of insurance contracts associated with housing credit, banks cannot require a customer to proceed with the insurances in their own insurer.
The same law also ensures that, even in the middle of the contract, you can transfer the life insurance to another institution later on.
Therefore, you can choose to take out life insurance with an insurance company outside of the bank. However, the bank may penalize the spread of your contract.
The relationship between life insurance and spread.
If you choose not to take out life insurance with the bank's insurer, the bank may change the conditions of the mortgage credit.
Usually, banks penalize the spread of credit, increasing the rate and, consequently, the amount you will pay for the loan.
On the contrary, if you choose to do the insurance with the bank, what happens to the spread is called a discount. The bank decreases the interest rate as "compensation".
However, it is important to note that a low spread does not always represent cheaper credit. This is because there are insurers that provide insurance subscriptions at significantly low prices, depending on the coverage you choose.
So, it may be that, even with a higher spread, it is worth hiring life insurance outside the bank. You may save more, even with a penalty on the rate.
It's a matter of getting your hands on the calculator and doing the math to confirm which situation is more beneficial.
Inform the bank of your intention, so that they can propose a simulation with a higher spread, contracting the insurance separately, and another with a lower spread with the insurance contracted with them.
Afterwards, compare the two contexts. Always remember that sometimes the cheapest option ends up being the most expensive. Also, the coverage matters, so you should consider your family's needs when choosing insurance, not just looking at the cost.
If you need help with life insurance issues, the Poupança no Minuto mediators are available to support you. They handle all mediation with insurers and answer all your questions about the process.