Changing your home loan life insurance

Credit Linked Life Insurance? You can change whenever you want

In the process of negotiating a mortgage loan it is normal for the bank to offer life insurance. This means that this insurance can be considered mandatory, but there is freedom of choice. The legislation says that the bank must inform the customer that he can choose to take out insurance with the insurer he wishes. Additionally, the customer can provide the life insurance he already has in his name as collateral, as long as he meets the bank’s minimum requirements.

What to consider when you want to change insurance

Just as there is the freedom to choose insurance at the time of the loan, there is also the possibility of changing the life insurance during the home loan contract.

> Spread and insurance premium spread

Some banks provide a spread advantage when taking out the proposed insurance. However, you need to do the math: the loss in this spread bonus can be compensated by cheaper insurance. If so, the savings are greater and the insurance change is advantageous.

> Affiliated coverage

Another thing you should do when changing the life insurance associated with your home loan is to compare the coverage. You may be able to switch to a new insurance that offers coverage with a higher level of protection and still save money.

Absolute and Permanent Disability (IAD) coverage protects in cases where the person has a degree of disability greater than or equal to 85%, becomes dependent on third parties and is unable to work. However, coverage for permanent disability by compatible profession or activity (IDPAC) is more comprehensive. It can be activated in situations starting from a degree of disability of 60% or 65%, even if the insured is not dependent on a third party (greater than or equal to 60% or greater than or equal to 65% disability).

> Evolution of the value of the prize over the years

The amount you regularly pay for life insurance increases as you age. Therefore, when comparing insurance, you should not only focus on the amount owed in the first year of insurance. The competitiveness of the first year could be lost in subsequent years, due to the accelerated evolution of the value of the premium (amount paid each year).

> Changing the calculation assumptions

Check whether the insurance companies you are considering reserve the contractual right to update the rate on the renewal date. If this happens, the insurer can change the conditions of your insurance and change what was initially agreed.

> Analyze exclusions

Insurance must be adapted to each person’s lifestyle. Pre-existing diseases are usually excluded. Then there are activities such as participation in speed races or the practice of some extreme sports which may fall within the list of risks not covered.

> Take into account differences in insured capital

When you take out life insurance, it is defined as a sum insured. In the case of insurance linked to a mortgage loan, the principal must be equal to the amount owed to the bank. The capital owed to the bank decreases over time. The insured capital can follow this update automatically or at the request of the insured person.

In cases where there is neither an automatic update nor a request from the insured, it is normal for the insured capital to become higher than the residual amount to be paid to the bank. In these situations, the difference between the insured capital and the debt to the bank is attributed to the insured or, in the event of death, to the person’s predefined heirs or beneficiaries. Let’s imagine the case in which the initial capital of 200 thousand euros has been defined and the insurance is activated when 50 thousand euros remain to be paid to the bank. In this case the insurer pays the remaining 50 thousand to the bank and allocates 150 thousand euros to the insured.

By transferring your life insurance to Tranquilidade you can save up to 60% compared to the amount you currently pay. Discover Casa Crédito life insurance.

How can life insurance be transferred?

If you want to change your home loan life insurance you must:

1- Report insurance which you signed in a letter sent to the insurance company. We have to put an end to it 30 days in advance on the expiry date of the policy (your insurance contract);

2- Inform the bank of the changeby delivering a copy of the insurance cancellation letter and sending a copy of the new contract;

As proof, keep copies of the letters, dated and signed by the insurance company and bank. Also, don’t forget to cancel your direct debit authorization (if you have one) from your old insurance.

Changing your home loan life insurance doesn’t have to be complicated. As you can see, it is not necessary to stay forever with the insurance that the bank offers you, you can evaluate other options and choose the most advantageous one for you. If you need help during the process, you can always speak to a Generali Tranquilidade mediator near you, who will be ready to support you and clarify your doubts.