Loan-linked life insurance: a guide to choosing a policy

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If you are inquiring about applying for a loan, you may have been required to take out loan repayment insuranceThis is not mandatory life insurance but a smart option that allows you to live your choice with more peace of mind.

One of the most common reasons for requesting a loan is to buy a house: in our country, owning a home is the goal of many families and is considered a synonym of economic stability and tranquility. A home is purchased with the future in mind, as a “safe” form of investment that can guarantee us tomorrow (even if it is not constant financial support) a safe point, a response to precariousness.

In this case, the law forces you to choose insurance that covers damage to the property (fire and explosion), and banks also recommend taking out life insurance, which will be useful in the event of death and absolute and permanent disability of the person. Who has to pay the loan. In this sense, among life insurance, the so-called loan amortization insurance is an act of responsibility: you will not risk that in the event that something happens to you, you will have to transfer to your children or your partner an economic burden (linked to the remaining installments) to maintain ownership of the property that you do not know if tomorrow they will be able to afford.

Why insure yourself with life insurance for mortgages and other loans?

A loan is an important step. Life insurance for mortgage or other loans allows you to be certain that you will be able to repay the debt in the event of any of the contracted coverages occurring; thus, with few exceptions, in the event of an accident, the company will pay the financial institution the insured amount of an asset as precious as your home. This is especially important when you have a family with children, but it is also important in the case of couples and singles since you also protect what matters most to you.

Think that the AARP life insurance compensation will be paid directly to the bank without your relatives having to pay the loan.

Multiple options to choose the most suitable and convenient mortgage life insurance and other loans

In recent years, the Regulators have reminded that, according to the law, it is not mandatory to take out life insurance for mortgages with the Entity presented by the bank that grants said mortgage. In this way, the choice of mortgage life insurance has been favored among several offers in order to find the most appropriate to the demands of the client who contracts the loan.

Banks usually propose solutions designed to protect customers who contract the loan through mortgage life insurance. It may be convenient to compare these offers with those existing in the market, either by making quotes on the Internet or asking for help from an expert (insurance agent or broker), comparing prices and coverage of life insurance. 

Usual guarantees of life insurance for mortgages and other loans

Some life insurance policies have been specifically designed with loan holders in mind and are therefore made to protect families or their loved ones if any of the contracted coverage occurs. In general, there is a very wide offer of life insurance for mortgages and other loans, although the range of guarantees is approximately the same:

  • Guarantee in case of death: in this case, the insurer with which the life insurance for a mortgage or other loan is contracted pays the insured amount to the financial institution.
  • Absolute and permanent disability: optional complimentary coverage. The company with which the life insurance for a mortgage or other loan is contracted will pay the insured amount to the financial institution.

In addition to these guarantees, each insurance company may offer complementary coverage. Taking into account that each coverage that is added implies an additional cost for the life insurance premium for mortgage or other loans, it is convenient to find the best guarantees for your case.

Life insurance for mortgages and other MetLife loans: Seguro de Vida Hipoteca (Crédito Seguro)

Within MetLife’s life insurance offer, Mortgage Life Insurance (Credit Insurance) allows you to benefit from all these advantages :

  • It guarantees your family the peace of mind of paying the loan even if death and absolute and permanent disability of the insured occurs.
  • The premium is linked to the capital pending amortization, and you do not pay the excess.
  • There is no grace period or franchise.
  • The price does not increase in the installment payment method.
  • Up to 40% cheaper than other similar life insurance.
  • €50 discount on the first year premium.
  • MetLife’s financial strength, stability, and global solvency make us the best choice for your life insurance.

How to compare life insurance for mortgage or loans: 5 useful tips

In a market with so much life insurance on offer, it is important to identify the guarantees that are appropriate for your lifestyle so as not to acquire life insurance for a mortgage or other loan that is not useful to you and spend much more than is strictly necessary.

Setting up a loan is already a considerable burden in terms of the documentation and information that your bank will ask you to provide, and you will have to read many informative pages full of clauses that are often difficult to interpret.

Below, we indicate some aspects that can help you choose the life insurance for a mortgage or another loan with the best coverage for your protection and better understand the existing policies in the market for this type of life insurance:

Ask them to confirm the coverage and limits they offer you and consult the general and specific conditions of your loan repayment insurance.

Often, when choosing life insurance for a mortgage or linked to another loan, the subscriber is convinced that all the coverage offered by the company is guaranteed. Find out in detail about in which cases the life insurance for mortgage or other loan guarantees you specific coverage, and thus you will avoid surprises.

Find out about the grace periods and the life insurance deductibles for mortgages and other loans. They are two technical terms to which, precisely, for this reason, the one who subscribes to the life insurance policy for a mortgage and other loans often does not pay attention, although they are two very important values ​​that should be studied. The waiting period is the interval of time during which the policy is active but not covered. Therefore, find out in detail about the duration of the grace period, which must be indicated in the conditions of the life insurance policy for a mortgage or other loan. Both the lack and the deductible may exist for some coverage included in life insurance policies such as Unemployment and Temporary Disability.

For its part, the franchisee establishes a limit below which the damages are borne by the policyholder or insured. Surely you are used to assessing this parameter in car insurance, and you know that the life insurance policy for a mortgage or other loan may not cover minor damage.

In the case of life insurance linked to loans, especially in the case of certain guarantees, there may be a deductible, but it is not something generic or usual in this type of life insurance.

Ask what happens to life insurance for mortgages and other loans in case of subrogation if you want to renegotiate the loan or change banks.

Most of the life insurance policies offered directly by credit institutions are closely linked to the bank you have chosen, and that has granted you the loan. This means that if you want to renegotiate the loan to get better rates, you should also cancel the life insurance policy for a mortgage or other loan and take out a new policy. Our advice is that you value a policy that allows you to change your loan or bank without having to sign a new life insurance contract for a mortgage or another loan, losing the conditions obtained.

Carefully study the costs of installment payments for mortgage life insurance and other loans.

Most life insurance premiums are annual and allow you to choose the payment method: single annual payment or annual premium divided into semi-annual, quarterly, or monthly payments. If you choose to make multiple payments, the value of the premium may increase due to the costs of the installment payment. It is important to investigate different life insurance prices to avoid higher costs and choose the payment method for your life insurance for mortgage or other loans that best suits your needs.

Ask for specific explanations about the limiting clauses or exclusions of the life insurance policy for mortgages and other loans.

All life insurance linked to loans, like all life insurance and insurance in general, include specific clauses, called limitations and/or exclusions. These are risks that are not covered in the life insurance policy for a mortgage or other loan. Each coverage has its exclusions. We advise you to read carefully these possible exclusions and limitations of the policies, which are always indicated in a highlighted way in the Special Conditions of the life insurance policy for mortgage or another loan.

By aamritri

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