Mortgage Life Insurance is a necessary solution and requested by the banks when approving the home loan.
You may be wondering: what is life insurance? Considered an additional financial security, this insurance aims to ensure that in the event of serious unforeseen events such as death or disability of the insured, the housing loan debt is settled, preventing family members or heirs from taking on this responsibility.
The solution, besides providing peace of mind for the whole family, is often required by financial institutions as a condition for approval of real estate financing. This requirement aims to ensure that, in adverse situations, the financed property does not become an unsustainable financial burden for the family of the insured.
The coverage offered by this insurance may vary, including not only the full or partial amortization of the capital in case of death, but also the protection in situations of total and permanent disability. In other words, the continuity of family assets and the security of the home are guaranteed.
When choosing a Mortgage Life Insurance, it is important to take into account the amount of the credit, the payment term, the age and health of the insured, as well as the specifics of the coverage offered. Relying on the guidance of an experienced insurance intermediary like Famasegur is crucial to select the most suitable policy. Thus, it ensures a complete and efficient protection for the family patrimony.
Continue reading the article and know the guarantees and advantages of this insurance, as well as the ways to save when you hire this solution. Before that, find out whether or not this is a compulsory insurance and know what factors influence the premium of the insurance.
Is Mortgage Life Insurance mandatory?
Although not mandatory, not all banks allow this insurance to be waived. This is because financial institutions usually require this insurance in order to have a minimum condition for the financing to be approved. However, it is not obliged to take out insurance provided by the credit institution itself.
If insurance is a necessary condition for the loan, the financial institution must inform you in advance and accept another life insurance policy, if it chooses to take out a different insurance. The only condition is that the insurance chosen offers the same conditions and coverage as those claimed by the bank.
Know the factors that influence the insurance premium
In addition to understanding that this insurance may be a requirement of many banks for the granting of financing, it is important to consider the factors that influence the value of the premium, that is, the amount you pay every month. When you choose insurance, the premium amount is determined for several reasons, including:
- The age of the insured(s);
- The capital insurance;
- The coverage and the modalities selected;
- The number of persons covered by the insurance;
- The term of the loan;
- The risk factors, ie, the profession or the diseases of the involved(s).
These are crucial factors, as they directly influence the risk that the insurer assumes when offering coverage. For example, the higher the insured’s age or the amount of funding, the higher the insurance premium tends to be.
In turn, when we talk about insurance capital we are referring to the amount that is paid by the insurer (or the bank, if applicable) when it is necessary to activate a cover. The insurance capital may or may not be updated depending on the amount owed.
The advantages and guarantees of Mortgage Life Insurance
With the recent introduction of exemption from property registration fees for young people up to 35 years old, effective since 1 August 2024, the purchase of a first home becomes even more affordable. This measure benefits young buyers, allowing them to invest in the acquisition of a property destined for own and permanent housing without the additional burden of registration costs.
Combining this advantage with life insurance, it is possible to ensure the tranquility and financial protection necessary to face unforeseen events. Besides, some insurers are already running some campaigns with discounts on life insurance associated with housing credit for young people up to 35 years.
This insurance offers several guarantees:
- Death coverage, in which the payment of the insured capital is made to the bank and the payment of any remaining capital, if any, to the other beneficiaries;
- Absolute Permanent Incapacity Coverage (IAD), which guarantees the payment of the insurance capital when, due to illness or accident, the insured is unable to carry out his professional activity. However, this coverage assumes that the insured has a degree of total disability (not being able to engage in any type of activity);
- Absolute Incapacity Coverage for Occupation or Compatible Activity (IDPAC), which, although similar to the IAD, differs in that it can be triggered from a degree of disability of 55%, not being able to exercise the current profession or similar;
- Complementary coverage options that include:
- Death by accident and minor child coverage;
- Waiver of premium payments in the event of absolute temporary incapacity for work due to accident or illness, involuntary unemployment or hospitalization.
However, the age limit for certain types of insurance coverage may be as high as 85 years.
There are also several advantages that this insurance provides:
- Customization and flexibility in the covers:
The insurance has a number of coverages, which can be customized according to the needs and profile of the insured. In addition to the basic coverage, such as full or partial amortization of the outstanding capital in case of death or absolute and permanent disability, there is the possibility of adding additional protections.
These options may include coverage for serious illness or accidents that result in temporary disability, providing extra financial support at critical times. The flexibility of this insurance allows for adjustment of coverage over time, reflecting changes in debt capital and family needs;
- Financial and asset stability:
By taking out Mortgage Life Insurance, you are protecting yourself and your family, since in case of a claim, you preserve the family assets – that is, you do not compromise the property.
The possibility of automatic revaluation of the insured capital keeps the value of the hedge aligned with the reality of credit, ensuring that the protection remains adequate over time. We can say that this insurance offers peace of mind and contributes to the maintenance of financial stability and assets of the insured;
- Amortisation of outstanding capital:
In the event of death or total and permanent disability, this solution amortises the outstanding capital so that the family does not have to bear the costs;
- Protection of family assets:
This insurance ensures that the financed property remains part of the family’s assets, even in adverse situations. Thus, there is no need to sell the house to cover the debt;
- Ease of hiring:
Nowadays, banks and financial institutions facilitate the contracting of this insurance by integrating it into the financing approval process;
- Maintaining quality of life:
By guaranteeing the payment of the housing loan, the insurance allows your family to maintain their quality of life without being burdened with unforeseen debts.
Smart Economy: save on your life insurance
After knowing the advantages of insurance, it is natural to want to maximize these benefits in a cost-effective way. With a few simple strategies, you can adjust the insurance to get adequate protection while staying on top of costs.
So, we present you two essential tips to save on this insurance without compromising the quality of coverage offered:
1. Compare offers from different insurers and choose comprehensive coverage
It may seem contradictory, but sometimes, and as the saying goes, “cheap is expensive”. Choosing your life insurance only based on the premium amount, opting for a more affordable policy may not be the best decision. Therefore, take some time to carefully evaluate all the coverages and exclusions of various proposals. Look at the different types of insurance available and make sure that only the minimum protection required by the bank is really advantageous.
Normally, most banks require only life insurance with Absolute Permanent Incapacity (IAD) coverage. However, it is recommended to consider the option with the coverage of Absolute Incapacity for the Occupation or Compatible Activity (IDPAC). This last option requires a lower degree of inability to activate the insured capital, offering more comprehensive protection.
Despite everything, do not forget that you are free to contract insurance in the entity that best meets your expectations and needs. The best life insurance is the one that suits you.
2. Ask for simulations outside your bank
Although it is common to take out insurance offered by the bank itself, this is not always the most advantageous solution in terms of cost-benefit. In fact, since 2009, to acquire the home loan, it is not mandatory to contract insurance at your bank.
Therefore, searching and studying policies of different insurers may be more economically viable. Moreover, opting for a bank-independent insurance can offer greater flexibility in the choice of coverage and contract conditions.
Life insurance is your guarantee for the future. Famasegur gives you the support you need to live with the peace of mind that your family is protected in case of an accident. Our partnership with almost all insurance companies in Portugal allows us to have a comprehensive and personalized offer. Do your life insurance simulation here.
