Mortgage: you have the right to bring your own life policy

In short

The bank may ask for life cover for a mortgage, but it must accept a policy from another provider with an equivalent level of guarantee (Article 12(4), Law 41(I)/2017).

• Ask for its requirements in writing and a quote outside the bank to the same requirements.
• In a package with the loan, you must be told whether the parts can be bought separately and what each costs.
• The 30 days of withdrawal as a rule do not apply to policies securing a loan: read before you sign.

When you take out a mortgage, the bank usually asks for life cover, so that the loan is repaid if something happens. That is reasonable. Often, though, it hands you the insurance “ready-made” together with the loan. The mortgage credit law says that you are not obliged to take the bank’s own.

What the law says

• Article 12(4), Law 41(I)/2017: when the bank requires the consumer to hold a related insurance policy, it must accept a policy from a different provider, as long as it has an equivalent level of guarantee to the one it proposed.
• Article 13: in its general information on loans, the bank must state which supplementary services you must buy, and that you may buy them from another provider.
• Article 11(4): if insurance is compulsory for the advertised terms, the advertisement must say so clearly.
• Article 394Ι, Law 38(I)/2016: when insurance is offered in a package with another product, you must be told whether you can buy the parts separately, and be given a description and the cost of each.

Law 41(I)/2017 covers loans for residential property. For other loans, ask the bank in writing whether it accepts insurance of your own choice.

How it works, step by step

1. Ask the bank for its requirements in writing. Sum insured, term, whether the cover reduces with the loan, whether it must be assigned to the bank, and whether both borrowers need cover.
2. Ask a provider of your choice for a quote. With the same requirements, so that the comparison is fair.
3. Compare cost and terms. Not only the monthly premium: exclusions, how the price changes, what happens if you change bank or repay early.
4. Submit the policy to the bank. With the assignment it asks for, and keep a copy of the letter and of the acknowledgement.
5. If it refuses, ask for written reasons. In what exactly is the cover not equivalent? If the answer does not satisfy you, make a written complaint to the bank and then see who to contact.

What to watch out for

• Level or decreasing cover. Decreasing cover follows the loan balance and is usually cheaper; level cover also leaves something for the family.
• Your own policy stays yours. A policy you took out yourself can continue after the loan is repaid, or move with you if you change bank.
• Health declaration. Whoever the provider is, answer honestly and keep a copy.
• The 30-day right of withdrawal as a rule does not apply to life policies taken out to secure a loan. Read before you sign.

Questions worth asking

• Exactly what cover do you require, and will you accept it from another provider?
• Does the interest rate change if I do not take the insurance you propose? Where is that written?
• What happens to the insurance if I repay early or move the loan?

What you can do now

• Ask the bank in writing for its life cover requirements.
• Get at least one quote outside the bank with the same requirements.
• Check whether you already have a life policy that could be assigned.

General information, not legal advice. For your own case the text of the law and the terms of your policy apply; if something is unclear, ask for a written answer.

Every policy has its own terms. What we write here is general information, not advice; for your own case, what your policy says applies, and it is worth confirming it in writing with your insurer.

How much cover does your loan need? See the “Mortgage protection check” tool.

Read also: Does loan insurance protect my family or only the bank? · Before you sign: what you are entitled to receive in writing

AVRASTRO is not an insurer.

Part of the series “Your rights as a policyholder”. Start with the 30-day right of withdrawal.