Which insurance policies are mandatory in a mortgage loan?
Banks usually require home (multi-risk) insurance on the property and, often, life insurance. Required by law and required by the contract are not the same — read the offer closely.
In this guide
Which policies come into play
On a mortgage, banks usually require home (multi-risk) insurance on the property and, in many cases, life insurance tied to the contract. The home policy protects the property; the life policy covers repayment in case of death or disability.
Required by law or by the contract?
Not everything the bank asks for is required by law — some of it is a contractual requirement. It is worth telling the two apart and reading the offer's terms before signing.
The weight on the total cost
Insurance can weigh as much as the spread. A competitive spread stops paying off if it comes with much pricier insurance. Compare it alongside the APRC and the total amount payable.
Worked example
One bank offers a 1.0% spread but requires in-house insurance at €70/month; another offers 1.1% with insurance at €40/month (example figures). The €30/month gap in insurance often outweighs the saving from the tenth of spread.
Sources
Susana Vasconcelos
- Intermediária de crédito autorizada pelo Banco de Portugal n.º 0008496
- Mais de 10 anos na banca