It is still common practice for the bank to force the client to take out life insurance with them in order to obtain advantages when signing the mortgage. But it can be even worse if this policy is a single premium. Courts have already ruled multiple times that single-premium mortgage life insurance is bad banking practice.
But what does this type of insurance consist of? Does it save money by contracting it with the bank instead of with a brokerage directly?
What is single premium life insurance?
Forcing a client of a financial institution applying for a mortgage to take out single premium life insurance and include the amount of the premium, which is sometimes several thousand euros, in the amount of the mortgage loan. This type of insurance has been a bad practice used by banks in recent years and it seems to have no end point.
According to an article published a few months ago by the Europa Press news agency, 47% of life insurance is signed with a single premium financed by the bank. Furthermore, according to the Financial Users Association, are claimable for abusive conditions.
Asufin ensures that the price of these insurances is between 60% and 300% more expensive than the same product sought by the client in the open market.
The association points out that “It is a product that can be claimed in court on which there is already jurisprudence, with up to fifty rulings favorable to the consumer.”
As he remembers newspaper La Razónsince June 2019, with the entry into force of the Law 5/2019, of March 15, regulating real estate credit contracts, It is prohibited to link insurance to the mortgage firm: “Although it is mandatory to contract basic fire damage insurance, the client is free to contract it with the insurer he considers and in the terms he deems most appropriate.”
A common practice of banks to sign a mortgage
As explained in the article in La Razón, banks can offer the contracting of insurance linked to the loan as a way of obtaining a discount in the conditions of the mortgage, but it is still a bad practice: the two things do not have to go together .
And more if as denounced from Asufin “The financing of this insurance leaves no trace in the deeds». He explains that the contracting obligation was only verbal and the insurance documentation was detailed in a separate document. And he adds that when this was the case, there was a conflict of interest:
«When a situation of unemployment or death occurred, it was more interesting for the bank to execute the unpaid mortgage, so the insurance was not activated automatically. In other words, the bank has no interest in having its own subsidiary disburse the insurance money. In a normal market situation, with unrelated banking and insurance entities, this is not a problem”.
Entities may require that life insurance and home insurance be contracted and kept in force throughout the life of the loan, but the client can always choose who provides it.
Still not sure what single premium life insurance is? Don’t you know what to do to get rid of the one you have today? Do you think you have been deceived and want to unlink the bank’s insurance? We invite you to investigate life insurance at elmejorsegurodevida.com or contact one of our advisors. Another option is to enter our comparator, the most complete online, and check how much you can save by untying your life insurance from the bank with which you have the mortgage.
And if you still doubt, remember that taking out life insurance with the bank is up to four times more expensive than with the insurer. And it is that single premium life insurance for mortgages is bad banking practice.
