Loan and mortgage insurance
As we have read in an article published on the website of the Bank of Spain, there is no obligation required by law to take out insurance linked to a mortgage or to loans .
Quoting verbatim the information published in the article of the BDE (Bank of Spain):
Is it compulsory to take out insurance when signing a mortgage?
In general, there is no rule that requires the execution of any insurance contract when signing a mortgage loan or when subrogating a pre-existing one.
However, it is usual for an entity, in order to grant a loan, requires the borrower to comply with one or more additional requirements (such as direct debiting a payroll, hiring a pension plan, hiring one or more insurance of certain characteristics, etc. ).
Therefore, it must be verified whether the obligation to contract said insurance is or is not agreed upon in the contractual conditions and, if so, it must also be verified under what terms it is contemplated.
Likewise, it must be verified if the obligation to maintain the insurance in force throughout the life of the loan with the same insurance company is contemplated, or if there is no impediment to change it.
In any case, once the operation is formalized, the obligations of the parties will be governed by the clauses and conditions that have been signed in the corresponding contractual documents. "
Linked life insurance is not required
In such a way that, we confirm that there is no requirement by law for the requirement of insurance linked to mortgages or loans .
It is the financial entities themselves that establish different conditions or requirements for granting their loans.
However, we must be clear that any abusive clause or requirement established by the entity would not be valid (based on point 2 of article 10 bis, and article 12 of the General Law for the defense of consumers and users).
We can all understand that financial institutions establish requirements for granting loans but, specifically in the field of life insurance, they are exerting an abuse of power over the client. They are demanding that it be contracted exclusively with them, regardless of whether there is the possibility of contracting the same insurance in better conditions in the insurance market and even collecting the insurance as a single premium. This is to prevent the client from changing the insurance to another entity throughout the life of the loan.
Hiring life insurance is more than recommended
Hiring a life insurance that, at least, covers the mortgage is the most advisable. We can live tragic situations that involve unforeseen events. Against this, having contracted life insurance, the backing of the compensation is assured against the payment of the capital that is pending at the time.
Even so, clients should not be forced to hire it according to the conditions that the bank requires, since they are usually less favorable than those that insurers can offer.