Credit life insurance for mortgage: How does it work?
When hiring a home loan, you must also subscribe to a life insurance. But why is it necessary to associate this insurance with the loan and how does this product work?
Why am I required to have life insurance for a mortgage loan?
So that you can hire a home loan, banks require you to subscribe to two insurances: a life insurance and a multi-risk insurance.
This is a mandatory step to conclude the process, as it is a way for banks to protect themselves.
Regarding life insurance, the objective is for the insurer to be responsible for repaying the loan if the client becomes 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.
That is, by advancing with life insurance as collateral for a home loan, the entity can offer a lower spread (a rate that measures the level of risk).
Can I get 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 the decree-law n.º 222/2009, which establishes rules on signing insurance contracts linked to housing credit, banks cannot force a client to proceed with insurance with their own insurer.
The same law also ensures that, even halfway through the contract, you can transfer the life insurance to another institution later.
Therefore, you can choose to take out life insurance with an insurance company outside 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 credit spread, increasing the interest rate and, consequently, the amount you will pay for the loan.
On the contrary, if you choose to take out insurance with the bank, the reduction in the interest rate is called a discount. The bank lowers the interest rate as "compensation".
However, it is important to note that a low spread does not always mean cheaper credit. This is because there are insurers that offer significantly low insurance premiums depending on the selected coverage.
So, it can happen 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 interest rate.
It's a matter of putting hands on the calculator and doing the math to confirm which situation is more rewarding.
Notify the bank of your intention, so that they can offer a simulation with a higher spread, contracting the insurance elsewhere, and another with a lower spread with the insurance contracted with them.
Afterwards, compare the two contexts. Always remember that sometimes the cheap ends up being expensive. Also, the coverages matter, and you must take into consideration the needs of your family when choosing insurance, not just looking at the cost.
If you need help with life insurance issues, the mediators Poupança no Minuto are available to support you. They handle all mediation with insurers and answer all your doubts about the process.