One-roof banking and insurance services add value to the client in terms of saving time, but not money. You can find out if it is more advantageous to take out a loan insurance in a bank or choose a separate risk insurance in the following article.
If you are repaying your mortgage, insure yourself.
Loss of breadwinner threatens his family much more if they repay loans. Everyone should consider whether to pay monthly installments in the event of loss of income, or whether the family and survivors will be able to continue repaying from their resources. In the case of family financial stability due to loss of income, in most cases credit insurance is the only solution.
This is most evident in the need to insure long-term mortgage loans, where the most important thing is based – the roof overhead. In the financial market, we have the opportunity to find a vast array of products to insure the risk of loss of income. How to be well insured I write in the article “7 Things You Should Know Before Closing Your Life Insurance”.
Is it better to insure a loan at a bank or insurance company?
Recently, almost every bank offers credit and mortgage insurance directly in the loan agreement. There would be nothing wrong with these insurances being more useful to the client than the bank. What motivates the bank to offer this type of product when there are specialized insurance companies in the market – insurance companies? Obviously these are the two main reasons:
- trying to exploit the client’s potential to close down
- reduces the risk of defaulting
However, credit insurance is a matter of the client’s needs and should not be the next step of the seller’s bank to meet the monthly plan.
If we wanted to compare the insurance with the standard risk insurance product from the insurance company, we would conclude that it was almost impossible. It is difficult to compare two completely different products. Bank insurance is not a standard risk insurance product.
Why is it stand-alone risk insurance more profitable?
Most clients demand that credit insurance be part of a comprehensive family income guarantee. In the event of a future mortgage draw, they merely adjust the existing policy. Such flexibility is not offered by bancassurance.
Separate risk insurance, unlike bank insurance, solves all problems associated with adverse life situations. Mortgage payment is not the only family expense. The insurance of death and lasting consequences in bancassurance practically always act as insurance with a decreasing sum insured, as the insurance of course only covers the balance of the loan.
In the case of permanent consequences of an accident, it is only when the Social Security Agency recognizes the client with full disability that it is fulfilled. And that’s when the body is damaged by up to 70%. This means that if you have a body damage of less than 70% you will not receive insurance coverage. And it is precisely these damages that occur statistically most frequently. 70% is a lot cheaper.
Other insurance offered by banks, such as incapacity insurance, job losses may not be appropriate for the client due to different performance exclusions and at a relatively higher price.
Payment for insurance
There are also banks that require premiums to be paid in advance for a certain period of time. Paying for something in advance when I am not sure whether I will need insurance in the future or whether I will still be a client of that bank seems illogical. From this point of view, insurance with premium payments appears to be a certain way of binding clients even after the end of the first period of interest rate fixation.
It also happens that the client does not have to pay the entire premium in advance, so the bank does not hesitate to offer the client a loan increase. And the result is that the client pays interest only on the mortgage amount, but also on the insurance price.