Undoubtedly, credit insurance is a specific service. Insurance is obligatory for some types of loans, while insurance is not required for others. In many cases, credit insurance is only a security for the lender, i.e. for the bank.
In the case of a home loan, insurance can be beneficial for the borrower, of course, in certain specific situations. Home loan insurance is primarily a collateral for the bank in the event that the borrower cannot, for various reasons (sometimes independent of one another) continue to pay his debt.
Bridge insurance is the most commonly used housing loan insurance. It is usually mandatory. In addition, this insurance is a component of the loan itself. Thanks to it, the bank protects its interests during the entry in the land and mortgage register.
In a situation where the borrower becomes insolvent, the bank has the option of recovering its funds. Of course, this does not absolve the customer from the obligation to pay the debts to the bank. Bridging insurance is strictly defined by the bank. It is the lender that imposes on the client a specific insurer with whom he works on a daily basis.
In addition to bridging insurance, some banks also require life insurance in the event of permanent disability or inability to work. In addition, the client may be asked to take out unemployment insurance.
Such a policy may, however, be subject to various restrictions, such as, for example, job loss cannot occur through the fault of the bank’s customer. In this case, many insurance companies require their clients an employment contract of indefinite duration. If this condition is not met, the customer will have trouble concluding such an insurance policy.
However, in the case of insurance against death or permanent disability, the family of the person who took the housing loan must present a number of documents confirming the random event that authorizes the repayment of the loan by the insurance company. Of course, this is not obligatory.
In most insurance companies, this is subject to further conditions. An example is the situation when the borrower’s death occurred as a result of suicide or as a result of the act of committing a criminal offense – in such situations the insurer is not liable.
Although, in general, home loan insurance is voluntary, sometimes bank customers are gently forced to sign a policy. An example is life insurance. If the customer decides to take out insurance, he will get more attractive terms of the home loan.
In addition, thanks to the housing loan installment simulator available on the bank’s website, we can see with our own eyes that a loan without insurance has an interest rate higher than the one with additional insurance.
The policy against the lack of own contribution
Another type of insurance applied in the case of a home loan is a policy against the lack of own contribution or a very low value contribution. In most cases, this insurance is compulsory if the borrower’s own contribution is negligible or not at all.
Of course, various banks use different solutions in the absence of own contribution – some increase the interest rate, while others require the customer to take out a policy for the missing part for a minimum period of three years.
Of course, the lack of own contribution is very bad for the borrower, primarily due to the additional costs he will have to incur, as well as the less favorable approach to the case of some lenders.
It is worth remembering that before we decide to use a housing loan, the offers of several financial institutions should be compared. For this purpose, we can use the credit simulator, but we must remember that the results provided can only be approximate.
Therefore, it is worth reviewing the terms of the home loan in detail, finding out what insurance is required by the bank, and on what terms. The borrower’s failure to obtain information on this subject may cost a lot, both to him and his heirs.
Which insurance is really needed?
Before choosing a specific offer of a home loan, it is worth considering which insurance is actually needed and which is only the lender’s invention. It is worth choosing a bank that has a more liberal approach in this respect.
It is worth noting that the person concluding the housing loan is required to read the loan agreement carefully and familiarize himself with the provisions of the insurance policy. The terminology that is used in these documents should be carefully looked at, as it may differ substantially among different insurers and banks.
Of course, housing loan insurance can be very beneficial for the borrower, primarily due to the lower interest rate, however, it is worth being aware that it depends on a variable interest rate. In addition, it includes a preferential rate and a margin.
In turn, the changing economic situation of our country may have a direct impact on reference rates. Therefore, you should keep this in mind and take into account the possibility of changes in fees. Therefore, before making a decision to take out a home loan, you should check with the lender for details.
You can also use the analyzes and data of the Polish Financial Supervision Authority. However, we must be aware that we are not able to predict the economic situation of the country a few years ahead, just as we are not able to predict and prevent unforeseen random events that may happen to us.
That is why it is worth analyzing at least those forms of housing loan insurance on which we have little influence. This will allow us to optimally match the offer to our financial capabilities.