Detaching life insurance from the mortgage is possible. When we sign a mortgage with a bank, it is normal that they condition the granting of the loan to us having life insurance. This ensures that they will get their money back even in the event of the death or disability of the mortgage holder. But once this process is done, we can unlink the life insurance from the mortgage as we are in our right.
The bank cannot force you to take out life insurance. The law says so. The European Directive of February 4, 2014, in its article 12.1 states that «Member States will authorize combined sales practices but will prohibit linked sales practices.» That is, your bank can offer you whatever it wants, but you are not obliged to accept it.
And in the same article, point 12 adds: ‘Member States may allow lenders who require the consumer to subscribe a relevant insurance policy in relation to the credit agreement. In these cases, Member States shall ensure that the creditor accepts the insurance policy from a provider other than his favourite provider when that policy has a level of guaranteed equivalent to the level proposed by the creditor.’
In other words, the bank has the right to:
Not giving you the loan if you do not have life insurance.
But does not have the right to:
Demand that the life insurance you do it in your entity.
The former is normal. The bank can deny you the money you need to buy your house if you don’t take out life insurance because it wants to make sure that, if something happens to you, death or disability, they will collect your debt; that if you are not there to pay them, an insurance company will do it for you.
This is not a chore for you, nor is it a wasteful added expense. Think about what would your family do if you die, because they will inherit your assets but also your obligations. Could they cope with the monthly mortgage payments without your income? Or would they have to abandon the house and acquire a huge debt for life?
Mortgage life insurance guarantees that the people you care about (your partner, your children or your parents), will continue to live in your home without having to face the monthly payment of the mortgage since the insurance company you have signed your mortgage life insurance with, will be the one taking care of this payment.
Don’t let your bank mess with you
The bank will offer you a discount on your mortgage interest or on the differential if you take out mortgage life insurance with them. As you can imagine, they do not do it out of generosity, but because it suits them. They make money selling insurance with the company they work with.
If you are interested, you can get your mortgage with the bank that suits you best and make your mortgage life insurance with the entity that the bank proposes you. But only if you are interested. If you change your mind, the Insurance Contract Law of October 8, 1980 protects your right to a refund. In its article 83. a) it says that “the policyholder in an individual insurance contract lasting more than six months that has stipulated the contract on his own life or that of a third party will have the unilateral power to terminate the contract without indication of the reasons and without any penalty within a period of 30 days following the date on which the insurer delivers the policy or document of provisional coverage”.
Detach the life insurance from the mortgage
Just as you can link life insurance you already had to a mortgage you contract; you can detach your
life insurance from the mortgage you already have. It is easy and you are going to save a lot of money
Before 30 days
To do this, according to the Insurance Contract law, before 30 days you must inform your bank through a burofax that you no longer want that insurance, without further explanation, and you can request a refund of the premium you have paid. In the text, you must indicate that you accept your right of unilateral withdrawal, protected by article 83 of the Insurance Contract Law, and that you want a refund of the amount paid, from which the elapsed days may be deducted.
The normal thing is that they pay attention to you since the law says so. But if not, you can go to the claims service of the Bank of Spain.
After the first month
If the 30 days have already passed, wait for that year you already have covered and then, one month before the renewal date, request the cancellation.
After several years
If several years have passed and it is now that you consider detaching your life insurance from the mortgage with your bank, do it, because it is always better late than never.
Whichever your case may be, you should go to your bank to get permission to cancel. In return, he will ask you for a new insurance in which he is a beneficiary as a guarantee of the return of the borrowed money.
The bank can increase the differential, or the interest should this is stated in the mortgage deed, and only in that case: it can penalize you exclusively if it puts it in the deed that you have signed.
However, if it appears so, the change will be profitable. Check it out in our penalty calculator, because the safest thing is that you will save not a little but a lot by decoupling the life insurance from the mortgage with the bank.
Detaching life insurance from your mortgage is not complicated. On our website you will find the model letter to send to the bank in order to cancel your life insurance with them. If you prefer, we can take care of the procedures with your bank, we can look for the insurance company that best suits your needs, and those of your family, the amount of the mortgage that you have left to pay, your income, etc. We are looking for a cheaper life insurance with all the benefits you need. Detach the life insurance from the mortgage.