In the last few years, we have been observing how before a mortgage loan we are required to take out a life insurance policy. Not to mention other additional obligations, of course (home insurance, direct debits, pension plan...). Today we will talk about whether the capital contracted in this life insurance is sufficient or whether we may need to supplement it.
Mortgage-linked life insurance
When you apply for 200,000 euros to buy a house, the bank requires you to take out a life insurance policy to protect your back. It is possible that, if you are a couple, both of you will insure 200,000 euros or each of you will insure only half.
In any case, taking it out with the bank normally involves a discount on the interest rate applied to us. We have already seen, recently, that there is no obligation to take out the insurance with them. At the same time, it is cheaper to take out life insurance with a broker than with the bank (this has even been acknowledged in the newspaper FiveDays, and so it appears in independent studies).
Is this coverage sufficient?
This question requires a case-by-case analysis, because the casuistry is infinite. A family with two children is different from a young couple with no offspring.
When we meet with clients who need information about their life insurance capital, we discuss:
- What family burdens exist
- What is their employment situation: are they self-employed, salaried, do both partners work, are they single?
- Whether or not they have more debts
This will determine the type of benefits offered by the social security system and, depending on this, the need to supplement the mortgage life insurance.
We must consider that, with the life insurance that only covers the loan, we are covering the bank's back. However, we are not responding to two of the purposes of the life insurance policy, as they are:
- that our family members have a capital to be received
- to compensate for loss of income due to death or disability of a family member
How do I calculate the life insurance I need?
In its day, we already did an article with the calculation of life insurance capital, The following list of options, depending on the personal circumstances of each individual, is available here.
If you need us to help you with the management of your life insurance,here we are. Call us or write to us and we will be delighted to help you.
