A popular choice and often recommended by credit institutions at the time of the loan is that of his insurance, especially for single- income families and / or with small children. Thanks to this additional guarantee, in fact, it is possible to be safe from unforeseen circumstances that would compromise the solvency of the contractor and its continuity in the payment of the installments. Let’s see below how this insurance works and how to choose it.
What is the mortgage insurance?
The mortgage is almost always the biggest expense that will be faced in the course of one’s life, and it is useless to remember how such an investment is very delicate: one commits for twenty or thirty years to pay a substantial installment every month, without knowing that what the future may hold in terms of work or health.
The issue becomes even more delicate when the mortgage holder for himself or his family is the only source of income for the entire core. This is why mortgage insurance is becoming increasingly popular, with flexible policies that even in the event of serious unforeseen events give you the certainty of always paying for your home purchase, securing the contractor and his family, especially in the presence of of young children.
In Italy – a nation that, as we know, has always been at the top of the list as regards the number of houses owned, unlike other states that favor forms such as rent – the percentage of people who insure their homes is still rather low (generally around 30%), but with regard to mortgage-related life insurance policies, such as job loss, the situation is different.
The types of policy
The banking institutions, in general, are in fact the first to advise the stipulation of the insurance on the mortgage understood as mutual life insurance : in general it is not obligatory to light this type of financing but – above all in general to the credit crunch of the last years, due to the economic crisis – it is strongly recommended, just to give greater security to the payment of the contractor to the credit institution in question. The fire and explosion policy is mandatory.
The fire and explosion insurance protects the borrower from damages related to the building in question, in relation to events such as lightning, fires and explosions, but generally without covering also the accidents caused by natural disasters such as earthquakes and floods. This policy is mandatory given the advantages it brings, as mentioned above, both to those who contract the loan and to the bank, which in this way protects itself from the loss of value of the property following events that diminish its value. Often this policy is offered free of charge by banks, otherwise it has rather low costs for maximum savings.
The life insurance policy for the mortgage
Speech different for the life insurance mutual, which protects those who contract the mortgage and his family from events that put at risk the ability to repay, such as death, serious injury or illness, but also the loss of work and economic unavailability. Compared to fire and explosion policies, the premium can be much more expensive and have an impact that is anything but insignificant on the mortgage payment, in case you have chosen to pay the premium periodically.
For this it is necessary, when talking about the mortgage policy, to carefully examine the different proposals available on the market. From the Liberalization Decree, banks or financial intermediaries are required to submit to the client at least two estimates from various insurance companies, which have no links with the institution or its group.
How mortgage insurance works
The operation of the mortgage insurance is very simple: by paying the premium regularly, if one of the events included in the case history of your mortgage policy were to occur, the insurance would pay the amount due as a mortgage, with compensation corresponding to the event in question. The types of cases covered can be of various types:
- Death of the insured
- Total permanent disability
- Temporary or total disability at work
- Voluntary loss of employment
The insurance will then deal with the extinction of the loan to protect the contractor’s family, and is therefore particularly suitable if you have dependent children and you want to protect your family from all kinds of unforeseen circumstances. The duration of the insurance for the loan is generally from 5 to 30 years, and normally its payment has a deadline that can be monthly (and therefore in fact added to the mortgage payment), half-yearly or even yearly.
To enter into this kind of policy, you must be resident in Italy and be between the ages of 18 and 70 ; usually the loan must be in euro, contracted in Italian with a bank or with a financial intermediary based in Italy.
And if the mortgage is terminated early? In this case the insurance company is obliged to return the unused prize, as required by the Regulation. Instead, in case of subrogation, it is necessary to stipulate a new policy to take advantage of insurance coverage, given that the old decade.
How a policy must be made to secure the loan
There are several characteristics that must be respected by a good policy for the insurance of the home loan, so that it can effectively provide a valuable guarantee for all those families with small single-income children, and where therefore an unexpected could have very serious consequences economically.
Evaluating the estimate for a mortgage case by case, of course it is good to make sure that different cases are covered, such as disability for any reason, freedom in choosing the beneficiaries from the insured and the insignificance of the sum paid (which must not be subject to inheritance taxes).
At times it might be convenient not to limit yourself to ensuring the equivalent of the principal of the loan that is being activated or – in the event that the policy applies to an already active loan – of what remains to be paid, but to insure a higher amount, always anyway respecting the limits (minimum and maximum) established by the company.
The contractor chooses the duration of the mortgage policy as well as the start date of the coverage, and in the great majority of cases these time limits correspond to the number of years in which the loan will be paid and the moment in which the first installment is paid. Also in this case the policies provide for minimums and maximums (generally between 5 and 30 years). Attention also to the expiration of the cover, which can be diversified due to the guarantee of death and total and permanent disability.
As with any life insurance policy, the amount of the premium depends not only on the amount of the loan, but also on the characteristics linked to the contractor, such as age, health status, habits.
Other things to check to be really sure you have chosen a good policy are the duration of ancillary guarantees, the amount of commissions received by the policyholder, any exclusion clauses, deductibles, the withdrawal method. For example, most of the insurances that protect in the event of the death of the contractor may not be applicable if the death is due to malice or due to drugs, dangerous sports and similar behavior.
Finally, the validity of the policy with regard to its activation time based on the specific event may be different ; in other words, sometimes there is a period of a few months (called ” deficiency “) for the activation of coverages for illnesses, while usually, in case of accident, the coverage is immediately active. It is possible to demand a shorter period of deficiency if the policy is activated at the same time as the loan and the application of the most favorable conditions required by the law of 03/24/2012, applicable to the policies linked to mortgage loans, is required.
The different types of mortgage insurance
The first fundamental division for life policies relating to the loan concerns, as mentioned above, the possibility of securing new mortgages only or even mortgages already being amortized. The coverage is not always the same: it happens quite frequently, for example, that for mortgages in the process of being amortized it is possible to take out insurance with the sole coverage for death, while in other cases, with new mortgages only stipulates, permanent disability, temporary total disability or loss of employment are also covered. In any case it is better to make sure right away, comparing the various proposals, that the chosen mutual house policy fits exactly into the profile we are looking for.
When the event guaranteed by clause occurs, the mode of delivery can also change. The residual debt can be settled or an indemnity equal to the monthly installments due, in the latter case when the total incapacity is temporary or has been incurred in the loss of work.
The possibilities of insurance for the mortgage offered by credit institutions and intermediaries are different, with tailor-made products: among these, the best known are Mutual Verse by LotLife, valid in the event of death or permanent disability, or Astrofinance, which provides two different formulas for a personalized coverage of the insured mortgage, even if already in progress: basic package and complete package, the first can also be subscribed for mortgages in amortization and the second with a greater number of protections, such as insurance mortgage job loss.
Subscriptions for a mortgage policy can also be subscribed online, on the company’s website, or with a simple phone call, answering a few questions to more accurately determine the contractor’s profile and providing their own payment information.