When we access a mortgage loan, we are aware that we are committing to pay certain amounts to the bank over a long period of time, which will normally be longer than two decades.
But perhaps we do not realize that, in the event of death during the loan repayment period, our closest relatives will be the ones who have to continue paying the installments or proceed to cancel the mortgage, paying the bank the capital that remains to be amortized.
The way to cover our heirs in this circumstance is to hire a life insurance for mortgage amortization, an inexpensive product that can be paid year after year without any variation in the installment during the duration of the mortgage.
En Euroteide Insurance We commercialize this type of insurance product and receive numerous inquiries on the subject, for which we have verified that many people think that the Mortgage life insurance It is required.
And not only that, but there are even those who believe that it has to be contracted directly with the bank that grants the mortgage loan.
Nothing is further from reality in both cases, so, in the following lines, we are going to explain, in depth, the characteristics of this type of Insurance.
Is life insurance mandatory for a mortgage?
This is the recurring question of many clients who come to us, just before signing their mortgage.
The doubt usually has its origin in the commercial tactics of certain banking entities, which condition the interest rate granted to the contracting of an Insurance of this kind with the bank itself.
The exhaustive answer to this question is that Spanish legislation does not impose any obligation to contract this Insurance.
Another very different thing is that it is advisable to do so voluntarily, or that our bank asserts its position of strength and tries to force us to contract it with the entity itself, but in no way is Life Insurance mandatory for the mortgage.
Furthermore, the client is entitled to denounce those banking practices in which the granting of the mortgage credit is conditioned to the contracting of this Insurance. To do this, you must present your case to the Bank of Spain.
The only insurance required by law in the cases of mortgaged properties is a Home insurance very basic, aimed at guaranteeing the bank the payment of the damages that could occur in the property while it is subject to the mortgage.
Mortgage-Linked Life Insurance: What Does It Cover?
A mortgage amortization life insurance, whether or not it is linked to the mortgage granted by our bank, exclusively covers the contingency of the death of the mortgage holder.
In this case, the insurance company will assume the payment of the outstanding capital of the loan and the expenses of cancellation of the mortgage. The property is definitely free of charges and at the complete disposal of the heirs of the deceased person.
However, in the event of accidents or illnesses that cause chronic situations of disability, it is the mortgaged himself who may find himself, in life and unexpectedly, without sufficient financial means to face the payment of his mortgage.
Therefore, in Euroteide Seguros always recommend our clients not to limit themselves to the contracting of a simple life insurance for mortgage and that they value the convenience of add to it the permanent and absolute disability coverage.
In this way, the mortgaged, in addition to protecting the assets of their heirs, will also protect their own assets: in the event of disability, the Insurance company will be responsible for the payment of the unamortized capital and the cancellation of the mortgage loan.
As an additional curiosity, some insurers make it easier for the client to pay for Mortgage Life Insurance through the single premium system, that is, a single payment is made at the signing of the Insurance contract and it will remain in force during the entire loan repayment term.
In the event of early cancellation of the mortgage, the insured will recover the amount corresponding to the proportional part of the single premium already paid and not enjoyed.
Can I unlink life insurance from my mortgage?
It may be that your bank has linked your Mortgage Life Insurance to a discount for the interest rate applied.
Even in that case, you have every right to cancel and unlink that Insurance. After doing so, you can choose between hiring it with another insurer or not with any. We recommend the first option.
How to do it
In accordance with current legislation, before the 30 days prior to the end of the annual life insurance contract, you must send the bank a written communication of which there is reliable evidence, communicating your firm and irrevocable decision to waive the extension of the contract and terminate it.
In the event that the bank ignores the communication, extending the Life Insurance contract and passing the corresponding receipt to the collection, you will have to file a claim with the General Directorate of Insurance and Pension Funds, an entity that depends on the Secretary of State for the Economy and Business Support, attached to the Ministry of Economic Affairs and Digital Transformation.
It is a claim that you have won in advance, as long as you have sent the written communication mentioned above in due time and form.
However, before starting the termination process, we recommend that you put your case in our hands. It is convenient for one of our experts to assess whether the savings produced by the cancellation of the Life Insurance, or by contracting it with another company, compensates you for the increase that the bank may apply to the interest rate of your mortgage.
Euroteide, specialists in all types of life insurance in Tenerife
Professionals Euroteide Insurance, with more than 25 years of experience, we are at your disposal to advise you in the termination or in the new hiring of this insurance product, guaranteeing you the best price in your Mortgage life insurance.
Come to our offices or contact us by phone and through Contact Form from our website. A specialized insurance mediator will be in charge of providing you with the information you need and clarifying all your doubts.