Life Insurance for Spanish mortgages

Hi there,

Just reading about the completion process and see that because we are taking out a mortgage we  have to take out a  life insurance policy.

Is this so and does anyone know the ins and outs of it ?

I would be grateful for some info as the books I have are a bit conflicting in their advice - to say the least !

 

Hi Gillian

We just completed and, have to say, the only insurance we had to take out was a short term one, something to do with the fact that we took an "interest only" mortgage for the first year, so it had to cover something to do with the interest rate fluctuation for that first year (or something like that - you can tell I'm a financial whizz!!).

We certainly didn't have to take out life insurance, but then we do have quite substantial life insurance which we listed on our application.  Maybe it's your particular bank who require it.  I remember friends who transferred their mortgage on a property in France to Abbey National and they were made to take out life insurance too by Abbey, for both of them (husband and wife).

Maybe Smiley can shed some light?????

Tread carefully with Life Insurance on your Spanish mortgage. I investigated this with my own (sometime never) purchase, and found the following:

1. The market in Spain seems much less developed than in the UK.

2. Cover seems generally to be more expensive in Spain than in the UK.

3. The payout under the policy (if the worst happens), will form part of the policy holder's estate and then be subject to Spanish Inheritance tax (remember there is no exemption between husband and wife in Spain) when in the UK it may not.

We decided for all the above reasons to increase our cover in the UK rather than take out cover in Spain - however we are still waiting for our doctor to fill in a form over 3 months after he had the letter asking him to do so. Obviously the mañana culture extends beyond Spain.

Hi guys lenders here will often insist on life cover for non resident mortgages. However we generally knock back the lenders we introduce to - one that specifically springs to mind that insists on it with direct applications and we always say ok we will take the volumes of business we do elsewhere and so they roll over and dont even try it on now. Problem a lot of the time is that because mortgages are not a regulated product here the lenders dont HAVE to tell you anything. I had a client about three years ago who turned up to complete at the Notary only to find he had to fork out over 7,000€ for a single premium life insurance policy. He didnt have the dough so could not complete - came to see us and we sorted a different product, different lender no life cover and completed about three weeks later. We have got one lender on our panel where we only place business in certain instances thus not a huge amount of influence and they will insist on the client taking life cover for a minimum amount that keeps it below requiring a medical. What Malcolm says is quite correct in that the proceeds of a life policy here also become subject to Spanish IHT - life cover here is more expensive and to add insult to injury in some cases unless you are a Spanish resident you cannot claim on the policy - look for that one in the small print at the Notary when you are trying to complete on your purchase and things are going nineteen to the dozen!

On the other side for those brave souls that are taking the plunge and coming to live here - any policy written in the UK will very likely be invalidated if you leave residency in the UK. If you are contemplating moving here the very minimum you must do is notify the provider. If you do not and a claim is made - even ten years down the line with ten years premiums - they will not pay out. You may even find they suggest terminating the cover as it will not cover you as non resident. There are a few providers that offer international policies and if you are already covered with one of them they may switch it for you to the international policy but likely at increased premium - then again if you have a policy that does not cover you as non UK resident whats the point in continuing to pay the premiums if they will not pay out on death.

Malcolm kick your GP up the arse....nicely - life companies in the UK pay GP's for medical reports - nothing against GPs before I upset Bobaol. Its not a huge amount (well it used not to be) but it is a fee for the inconvenience caused - I sympathise with all doctors and it is likely your GP is already over stretched but at the same time he/she might need a reminder to deal with it. If something were suddenly to happen for an applicant with a previous clean bill of health then it will seriously affect the insurers attitude to underwriting. Reason I say this is that it happened to a client of mine about 5 years ago - proposal in to the life company for about 9 weeks waiting for the GP report on a life and critical illness policy when the inevitable happened - guy had a car accident and loss of limb. Leave the rest to your imagination. 

Thanks guys,lets hope we dont have to take out a life insurance policy.I just thought that it was mandatory judging by the book I am reading - hey ho I will just look for another book !!

all the best,

 

hi we completed 3 weeks ago and life insurance was never mentioned. Our mortgage is with Banco popular so I don't know if that makes a difference

After reading this thread I was wondering, if you have a serious or terminal illness which you mention to the bank do they decline the mortgage because they can't sell you the life insurance or do they choose to complete on the mortgage but realise your can't get cover so don't bother with the insurance sales patter ?

Just a thought !!

Try it!!

Life insurance provides a lump sum payment upon the death or terminal illness of an individual.

 I took out a mortgage around 18 months ago and the bank said that I had to take their life insurance policy. It costs me over 800 euros per year! I have looked for cover in the Uk and can get the same cover for around 200 euros per year. I have written to my bank and asked them to clarify if it is a requirement of my mortgage to have their life insurance, if it isn't I will arrange cover in the UK, if it is It will probably be cheaper to switch my mortgage to another bank who don't insist on their own insurance.

Hi Jarvi,

Check your deeds to see if the life insurance is included as a condition of the mortgage; if there is no mention then they really cannot force you to renew. Banks normally ask for at least 2 months notice to cancel.

 

Dear Sir,

      I only wish people were far more familiar with such clauses. Currently all clients seem to be interested in is what the headline rate is. As such many see no reason to pay for professional advice when it comes to taking a mortgage in Spain. Agents involved often dont help. Here in Tenerife clients are usually dragged into the nearest bank and lumbered with any old product and told it is fantastic. Only now, during such tumultuous times are many of these clauses enacted by banks and the borrowers have little or no idea why they ares still paying 6% when rates are historically low.I am currently dealing with a few cases where a client wishes to remortgage/switch lender bu their current lender has added on upfront life insurance (to the tune of 20,000€ plus). The bank wont cancel the insurance and insists it has to be kept even if the client switches lender. Unfortunately since it is added to the loan upfront it will incur interest at prevailing rates for the full term of the mortgage more than doubling its actual cost....!!!

 I hope this link may be helpful for everyone: Cheap Caravan Insurance

 

This message was last edited by jcksn65 on 19/11/2010.

I have found life insurance in Spain to be considerably more expensive than good life Insurance back in the UK.

I am not sure why this is; I just found that it was.

One of the key things that you need to consider when organizing Spanish Life Insurance cover is the Inheritance Tax you would have to pay should you die and what effect this could have on your familys ability to live.

I know that all this sounds a bit dramatic but consider that the Tax exemption for any spouse in Spain is very very low. In the UK your estate can be left tax free up to a value of 240,000, in Spain only the first 10,000 euros is actually tax free!

With Spanish Life Insurance and all life insurance in general the devil is in the detail and if you do practice any dangerous sports, even Skiing or Water Skiing then be sure to check that you are covered. Another favourite thing Insurance companies sometimes refuse to cover is horse riding!

Depending on the size or value of the life insurance in Spain you may need o have a full medical examination before any company will be prepared to insure you.

If you have a mortgage on any property in Spain they you may find that the mortgage company will insist on you taking out Life Insurance for the value of the mortgage.

Lastly many life insurance companies in Spain offer individual policies as well as family policies. You may find it far more economical to obtain family life insurance in Spain rather than an individual policy.

Regards...!

My bank havve contacted me and told me that the life insurance was a condition of the mortgage - what a rip off!  I am now going to look into changing my mortgage to another bank as I have calculated it's going to cost me around 20,000 euros for cover I don't really want.

Sadly many banks have that condition and many people agree to it when they buy a property.Changing your mortgage to another bank is not a good option as there are set up fees and cancellation fees to be paid which are costly. Best to bite the bullet !

Dear Jarvi,

Did you know that some of these companies now offer to give you back your premiums - IF you pay off your mortgage as agreed over the 30 year term? (Of course, how many consumers actually do that...?)

jcksn65...

Just curious...what has a link to cheap motorhome insurance have to do with anything being discussed here?

Vested interest perhaps? Shameless plug?

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 But important to know that it is  not a legal requirement.

Maybe this will start changing now,  I would certainly suggest eveyone looking for a mortgage now to go around and ask at different banks and compare their requirements on these "imposed" services