Mortgage life insurance: is it mandatory, is it possible not to insure, pluses and minuses, price, insurance features
Most insurance products in Russia are voluntary. They are offered only to those who, at their own request, decide to seek protection for one or another unforeseen event.
However, mortgage life insurance is only formally considered optional.
In fact, many banks will not give you a loan at all until you bring them a policy. But such insurance may be useful to the borrower himself.
After all, no one can predict in advance an accident and loss of performance, which means that the support of the insurer will be very out of place.
In the article we will consider all the nuances of this type of insurance, find out who needs it, what benefits the borrower and financial institution get from it, whether it is possible to arrange a mortgage without this condition.
Mortgage Life Insurance: Duty or Goodwill
Earlier, life and health insurance for a mortgage appeared in the list of required documents when applying for a mortgage loan. Relatively recently, Rospotrebnadzor explained that the federal law “On Mortgage” does not provide for such a requirement, therefore, borrowers are not required to insure themselves.
The current legislation only mentions compulsory insurance of collateral. But we are not talking about mortgage borrowers.
If the lender requires you to have a life insurance contract, this can be considered a violation of the Law on the Protection of Consumer Rights.
But this fact does not guarantee you a loan for the purchase of a new apartment. If the bank requires you personal life and health insurance for a mortgage and you begin to refer to the law, be prepared to refuse for any objective reason or without any explanation whatsoever.
Despite the explanations of Rospotrebnadzor, the situation remains unchanged today. 90% of financial institutions still require insurance policies when considering applications.
Clients prefer not to go to court to assert their rights, but simply take out insurance and get the treasured money for the apartment.
Many understand that a policy is not just a piece of paper needed to get a loan. This is a guarantee that the insurer will solve their problems upon the occurrence of an insured event.
In our unstable and turbulent time, everyone can lose their job or work ability, and the borrower is obliged to pay the bills in any case.
So, we found out that in order to get a mortgage it is not necessary to conclude an agreement with the insurer. Finding a banking institution that complies with applicable law and grants you a loan without undue delay will not be so difficult.
But will you really save if you refuse the services of an insurer?
Most likely the opposite. And there are several reasons:
- Without insurance, the risk of non-repayment of the loan increases, which means that the creditor bank can raise the rate at which additional losses will be included in case of injury, serious illness, death of the borrower.
- Your loved ones will be under attack. If the borrower loses the ability to pay debts, they can be evicted from the apartment or forced to return money instead.
- The costs of treatment and rehabilitation will place a heavy burden on you and your relatives, while at the same time continuing to make regular mortgage contributions.
In case of injury, poor health, disability will help out life insurance for a mortgage, the cost of which is very acceptable for most able-bodied people.
Comprehensive mortgage insurance is the most expensive program because it is associated with a fairly high risk. The higher the age of the borrower, the greater the likelihood of an insured event due to an exacerbation of a chronic illness, injury, or other risk.
Accordingly, mortgage life insurance rates will also be higher.
Insurance premiums are paid annually over the entire term of the mortgage, however, the premium is recounted every year, since the insurance amount (amount of debt) is reduced.
On average, the price of insurance that covers the risk of losing the ability to pay the loan debt can be 1.4%, in rare cases it reaches 2% of the loan size.
For example, you take a mortgage in the amount of 1 million rubles. The first insurance premium will be equal to 15 thousand rubles. Starting next year, the price of the policy will decrease as the amount of debt decreases.
In order to attract customers, insurance and financial organizations carry out promotions and offer various joint programs, within which insurance can sometimes be bought at a reduced rate (0.5-0.8%). Such a reduction provides significant savings for the entire lending period.
For example, we take 2 million for 15 years, we buy a policy at a discount at a rate of 0.5%. Savings for 15 years will amount to 200 thousand rubles.
Nuances to Know About
When deciding to take out personal life and health insurance for a mortgage, remember the following:
- The cost of the service is calculated from the total amount of the loan only when applying for the first policy. In subsequent years, the premium is recalculated, taking into account the reduced amount of remaining debt.
- You can only expect to receive reimbursement provided that you have fully paid and paid the insurance premium in time.
- A list of risks covered by the policy is available in the contract. Learn it.
The insurance compensation in your case can be 2 options:
- credit tranches, which are paid according to the established schedule,
- the balance of the loan debt, which can be fully repaid.
Many people with a negative perceive the need to disclose their personal health information, which is necessary when concluding an insurance contract.
At the same time, some insurers require borrowers to undergo a medical examination and even send them to special clinics.
However, this issue must be approached with understanding. After all, such requirements are not caused by curiosity or personal interest.
The Bank is concerned that the borrower remains healthy and able to work in order to return his money on time and in full.
Insurers expect that they will not have to pay compensation for a policyholder who is suddenly ill or incapacitated.
Therefore, a healthy client for the company is a guarantee that you will not have to part with money.
It is most advisable to trust the insurer and go through all the proposed procedures: pass the necessary tests, visit specialists.
So you make sure of your good health, the absence of hidden diseases and serious problems, and you can also confirm to the bank and the insurer that you are a reliable, trustworthy client.
Remember that the insurer has the right to refuse to pay compensation if it was concealed from him about increased insurance risk (chronic illness, dangerous hobby, occupation).
View a list of insurance coverage covered by your chosen company. Also, get the support of an experienced insurance lawyer: he will be able to prove the illegality of the refusal of the insurer to pay compensation if this ever happens.
It is necessary to insure!
From the foregoing, it is clear that personal life insurance for a mortgage, the borrower needs.
The policy is needed to obtain a loan for the purchase of an apartment and to provide financial support in case of temporary or permanent disability, loss of ability to pay contributions to the bank.
The insurance policy guarantees that in an unforeseen situation, with an injury or a sudden illness, the burden of the mortgage will not fall on the shoulders of your relatives, and the insurer will pay the bills for you.