Home mortgage insurance when it is mandatory?On July 10, 2019 by admin
Did you go to apply for a mortgage to buy your first home and did the banks and institutions you turned to inform you that you also need to take out a mortgage insurance policy?
I imagine you have confused ideas, you don’t know if the insurance for the mortgage is obligatory and if, above all, you have to subscribe it through the institute that delivers the loan or if you can freely choose which policy to choose to save.
Do not worry, when you have finished reading this article, you will find out what are the possibilities to reduce the cost of the loan for the purchase of your home and how to find the best insurance.
Let’s see first what the home insurance for the loan
The policy protects the borrower from unpleasant events that could affect his ability to repay the debt to the bank. While performing a similar function, the insurance should not be confused with the guarantees requested by the bank at the time the loan is granted: these, like the mortgage, as explained in our relative article, or the signature of a third guarantor, serve the bank to reduce its risk in case of insolvency of the borrower, due to economic difficulties or other reasons. Instead, the insurance protects those who have contracted the mortgage (or their relatives) in case of negative events concerning the property or its condition.
One of the doubts that assail many consumers who are about to sign a loan agreement concerns the mandatory nature of the insurance policy. It must be clarified that only a particular policy is mandatory, while all the others that could be proposed by the bank are optional. Compulsory insurance is the outbreak and fire policy, which protects the building in the event of accidents that reduce its value. Similar events would have repercussions both for the owner of the property (perhaps granted as a mortgage) and for the bank, which would be exposed in reference to a house whose value is no longer the original one on which the loan was contracted.
However, if this policy is mandatory, the same cannot be said about the choice of the institution to which you must turn to activate the insurance coverage, which is at the discretion of the customer . Naturally, the bank where the loan is subscribed will propose its own insurance product or that of an affiliated insurance company, but in reality the user can also freely address other companies, searching for the most convenient policy and suitable for his needs.
Other policies are not mandatory but could be very useful. We will indicate two in particular.
The first protects the borrower in the event of loss of employment
The cover is triggered where the debtor loses his job and therefore the possibility of repaying the installments consistently. In this case, other solutions can be used, such as the Public Solidarity Fund. The other policy is life insurance, which covers the eventual death of those who signed the mortgage. In this case, this home mortgage insurance prevents relatives of the deceased from finding it difficult to repay their debt with the bank.
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