Mortgage credit life insurance: How does it work?
When taking out a home loan, you may encounter the requirement to also subscribe to a life insurance policy. 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 home loan?
So that you can hire a home loan, banks require you to take out two insurances: life insurance and multi-risk insurance.
This is a mandatory step to conclude the process, as it is a way for banking institutions to protect themselves.
Regarding life insurance, the goal 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 coverages, in case of death or disability of the borrower, the bank becomes the creditor in the insurance policy.
In other words, by advancing with life insurance as collateral in a home loan, the entity can offer a lower spread rate (a measure of risk level).
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 decree-law no. 222 of 2009, which establishes rules on the signing of insurance contracts related to home loans, banks cannot require a client to purchase insurance from their own insurer.
The same law also ensures that, even in the middle of the contract, you can transfer life insurance to another institution later.
Therefore, you can choose to take out life insurance at an insurance company outside the bank. However, the bank may penalize the spread of your contract.
The relationship between life insurance and the 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 by increasing the interest rate and consequently the amount that you will pay for the loan.
On the contrary, if you choose to take out insurance with the bank, what happens to the spread is called a bonus. The bank decreases 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 insurance companies that offer significantly low prices for insurance subscriptions, depending on the coverage you choose.
So it may 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 rate.
It is a matter of putting hands to the calculator and doing the math, to confirm which situation is more advantageous.
Notify the bank of your intention so that it can propose a simulation with a higher spread, hiring the insurance outside, and another with a lower spread with the insurance contracted with them.
Afterward, compare the two contexts. Always remember that sometimes the cheap option ends up being expensive. The coverage also matters, so you should take into account your family's needs when choosing insurance, not just looking at the cost.
If you need help with life insurance related issues, the mediators Poupança no Minuto are available to support you. They handle all the mediation with insurance companies, and answer all your doubts about the process.