When taking out a mortgage, borrowers often insure their lives for the entire term of the loan. We tell you in which cases personal insurance is necessary and how to determine the optimal amount of insurance payment.
Is life insurance mandatory for a mortgage?
By law, the borrower is only required to insure the property that is pledged for a mortgage loan. Life and health insurance is the borrower's initiative, and he may not resort to it.
There are three significant benefits to personal mortgage insurance:
Higher chances of approval . If the borrower's life is insured, the bank's risks are significantly lower. It can approve an application even for clients with a bad credit history and not very high income.
Favorable credit conditions . Reduced bank risks also affect the indonesia mobile database rate: for insured borrowers it is usually lower.
Property protection . If an insured event occurs, the bank will receive payment from the insurer, and the heirs will receive the right of ownership of the apartment.
The main disadvantage of life insurance for a mortgage is the increased costs. The cost of the policy can be included in the loan amount, and then interest will be charged on it. Since mortgages are issued for a long term, insurance significantly increases costs. Borrowers can also pay for the policy annually from their own funds. This is more profitable, but adds a burden to the budget.
Is it possible to cancel insurance after it has been issued?
The insurance contract can be terminated and the full or partial cost of the policy can be returned:
There is a cooling-off period for the first 30 days, during which you can cancel the insurance and get back all the money spent.