Do you know how save on life insurance, keeping you protected in case something happens? Knowing the type of insurance you have, comparing prices and knowing how to negotiate are some ways to achieve some savings. But beware, that when it comes to life insurance, choosing the cheapest one is not always the best option.
Life insurance is often taken out when you have a home loan, but can be taken out at any time. Basically, it is a way of ensuring that, in the event of the death of the insured person, the beneficiaries are compensated. And, in the case of housing credit, which the house is paid.
But not only. Life insurance can cover other complementary coverage, such as disability, accident or unemployment risk.
However, there are also life insurances where the person receives a certain amount if they are alive at the end of the contract. In this case, life insurance works like a savings accountor as a way of, reaching a certain age, being able to pay the expenses associated with the necessary care.
Mortgage life insurance: is it mandatory?
By law, a bank cannot require you to take out life insurance in order to obtain a home loan. But the truth is that it is very difficult to get a home loan without doing so. Confused?
Let’s see: as it is a loan with a high value, the banks want to guarantee that, if something serious happens, they will not stop receiving the installments and the house will not go unpaid. On the other hand, those who make the credit want to ensure that, in the event of death, family members do not inherit a heavy debt. Thus, and by taking out life insurance, you are ensuring that none of the parties lose out.
In addition, by subscribing to this type of insurance, you can benefit from better conditions on your loan. If this is associated with other mandatory insurance, such as multi-risk, the conditions may be more favorable.
Therefore, and in some cases, it pays to take out these insurances with the insurance company associated with the bank. However, while this is a way to save on life insurance, it cannot be forced. In other words, the bank cannot impose a certain insurance on you as a condition for giving you credit.
The obligations of the law
The law also determines that, if your bank wants to offer you life insurance, it must have a minimum content. The insured capital and the amount owed to the credit institution must be identified, and these two amounts must be updated simultaneously. That is, as the amount owed decreases, the insurance premium must decrease. A descent that can be canceled out by the age factor, as we will see later.
There are also several pieces of information that must be provided by the bank in the event that life insurance is an essential condition for obtaining a home loan. For example, clarifying who is paid compensation in the event of death or stating that customers have the right to opt for the life insurance they want.
Coverages and Exclusions
Saving on life insurance shouldn’t mean you’re less protected. That is, cheaper insurance may mean that, if something goes less well, you may not receive the protection you expected.
So, and when doing the math to save on life insurance, analyze the coverages and exclusions well.
IAD or ITP coverage?
In the case of life insurance associated with housing credit, and although it may not seem like it, there is a big difference between coverage for Total and Permanent Disability (ITP) and Absolute and Definitive Disability (IAD).
in insurance with ITP coveragethe insurance can be activated if an illness or accident results in a disability of 66.6%which prevents the insured from exercising a professional activity.
if you have one IAD coverage, O degree of disability must be greater than 80%. That is, you must receive assistance from others to meet your most basic needs.
In short, coverage for Absolute and Permanent Disability (IAD) may even represent a savings in the premium, but in the event of an accident or a stroke, even if you cannot work, you will still have to pay for the house.
Exclusions and Penalties
When analyzing the insurance you should also have attention to exclusionsie, to what is not covered. Exclusions such as death or disability caused by suicide, crime, consumption of alcohol or drugs or more dangerous sports are common.
When taking out life insurance, you will have to answer questions about your health and, eventually, undergo medical examinations. If, for example, you had an oncological disease, you may see the value of your premium increase.
On the other hand, and as the premium value must reflect the risk, situations such as hypertension, smoking or medical history can increase the amount payable.
Ways to save on home loan life insurance
Supposedly, and as the debt to the bank is paid off, the value of the insurance should also go down. Thus, the more you amortize the loan, the more you would be able to save on life insurance.
The law even says that the bank must inform the insurer about “the evolution of the amount owed under the housing credit agreement”. It also determines that the update of insured capital.
If you have overpaid, the adjustment is made by “crediting or refunding to the insured the amounts paid in the meantime under the insurance contract”.
So, and if you don’t know if the update is being done, review the documents or talk to your mediator. It is because, often, this obligation is not being fulfilled, especially in contracts prior to 2009, the year in which the law was published.
As this update allows you to save on mortgage life insurance, it is important to ensure that it is actually being done.
However, don’t forget that as time goes on, it’s not just the loan amount that goes down. Yours age also increasesthe risk of death is higher and, consequently, the value of the prize also goes up.
Given this, is it really possible to save on life insurance? Yeah, as long as you know what to do.
Step 1: Find out what insurance you have
As we have seen, we do not always know the coverages, exclusions and other items of insurance contracts. And, in order to compare and save, it is important to know what you have. Only in this way will you be able to see if the other proposals are worth it or if, on the contrary, you will pay less, but will also have fewer benefits.
Take a good look at your policy, talk to your intermediary and see if, within the conditions you have, there are other cheaper insurances.
Another tip is to know how much you will pay over the course of the loan. As we have seen, the premium will increase as you age. Therefore, you can request a simulation of how much you will pay each year, until the end of the credit.
If you find the value excessive, it is best to start looking for an alternative.
Step 2: Negotiate
Is it possible to save on life insurance, but have an increase in the mortgage? It can happen, especially if you took out the insurance with your bank. That is, to get a spread lower, you may need to subscribe to various products and services. By giving up one of them you can lose this benefit.
The best thing is to do the math and read the “small print” of the contract. If you are not satisfied with the coverages, look for an option that suits your needs and compare values.
Is it possible to change insurers?
As we have already seen, and in the case of insurance having been taken out by the insurance company linked to the bank, changing may mean paying more for the installment.
Still, if you come to the conclusion that it’s worth it, you may come across the bank’s intransigence. If the latter tells you that you cannot change insurance companies, it is time, once again, to reread the documents, namely the deed.
See what it says about spread and even if you talk about penalties, try to negotiate. Even if you do not change companies, you may have a cheaper option with the same insurer than your current one.
The secret to saving on life insurance is to look for an alternative or, at least, pay less for the insurance you already have.
- Electronic Journal of the Republic Decree-Law no. 222/2009 Consumer protection measures in life insurance contracts associated with mortgage loans