Mortgage insurance: reviews. Comprehensive mortgage insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Mortgage insurance is required when buying property on credit. When issuing a loan to a borrower, banks put forward an additional requirement - the purchase of a mortgage insurance policy.

The federal law "On Mortgage (Pledge of Real Estate)" requires compulsory property insurance against damage and destruction. When issuing a loan, many banks insist on additional or comprehensive insurance to minimize their own risks.

Why do I need insurance?

Mortgage - a loan for a maximum period at a minimum percentage. Therefore, banks seek to reduce the risk of default and offer comprehensive mortgage insurance. The object of property insurance is a pledge, that is, an apartment. But for complete protection, banks prefer that the client insure their life and he alth, as well as the risk of loss of property rights.

Customers who opt out of additional policies often have higher interest rates. But most often, borrowers themselves understand that anything can happen in life, and voluntarily conclude additional insurance contractslife and he alth.

As for title insurance, it applies not only to housing bought on the secondary market, but also to new buildings. In practice, there are cases of problems with the previous owners of apartments, and double sales of apartments under construction. The new owner needs this type of insurance only for the first 3 years, before the expiration of the limitation period for challenging real estate transactions.

Specifics of mortgage insurance

Mortgage loan insurance has some features. The contract with the insurance company is concluded in favor of the creditor, that is, the beneficiary, who will receive the insurance compensation, is the bank, and not the borrower. Therefore, the sum insured, as a rule, corresponds to the size of the loan.

The amount of debt is gradually reduced, and accordingly the cost of the policy is reduced. In the event of an insured event, the bank receives compensation in the amount of the issued loan, and the homeowner loses the funds invested independently, including the initial payment. To prevent this from happening, you can draw up an insurance contract for the full cost of the apartment. Then its owner will become the beneficiary of his part of the sum insured.

Such conditions are offered by many companies, including VTB Insurance. Mortgage insurance can provide protection for both the bank and the borrower.

Benefits of lending

Primarily, mortgage insurance protects the bank fromlosses that may arise due to the borrower's failure to fulfill its obligations. This plays a special role in situations where the sale of collateral is not possible or does not cover the entire amount of the debt.

Thanks to the existence of insurance, mortgages are becoming available to more people at a reduced rate.

Property insurance

Mortgage insurance primarily involves the protection of collateral. The object of insurance in this case may be structural elements and interior decoration of the premises.

One of the major players in this market is Rosgosstrakh. Mortgage insurance in this company includes the widest list of possible insured events. Usually this is a fire, explosion, flood, lightning strike, natural disaster, illegal actions of third parties, design defects, etc.

Life insurance

Some banks insist on life and he alth insurance for the borrower. Such insurance includes the following risks:

• temporary disability of the insured person;
• permanent disability and disability;
• death.

When applying for a policy, a medical examination may be required. If at the same time factors that threaten the life and he alth of the client are found, the cost of insurance may be increased.

Title insurance

This type of insurance against the risk of loss of property rights is also included in the comprehensive insurance program. Borrower insuresthe risk of losing the right to property if it is challenged by third parties. In modern conditions, such a service is very relevant and can protect against fraud by the home seller. In some cases, it can be difficult to check the legal purity of a home.

Price and conditions

Many insurers provide mortgage insurance. Reviews indicate that the final cost varies depending on the company. You should not conclude a contract with the first proposed insurance company, it is better to find out about the conditions and price at least in several representative offices. The bank provides the borrower with a list of trusted insurers, which includes the largest market players, for example, VTB Insurance.

Mortgage insurance is carried out throughout the duration of the mortgage agreement. The sum insured is set equal to the amount of the received loan, increased by another 10%. At the request of the borrower, the property can be insured for the full value.

You must pay premiums every year. Their size will decrease as the loan is repaid. Also, the amount of the insurance premium directly depends on the sum insured, the age of the insured, the type of loan agreement and the acquired property, the number of borrowers are important.

The cost of the insurance policy is determined individually, depending on the above factors. For a borrower, mortgage insurance will cost approximately 1.5–2% of the sum insured. This is the price of comprehensive insurance covering almostall possible risks.

The insurance contract can be executed the next day after the submission of documents and application.

Actions in the event of an insured event

If an insured event occurs, then the borrower's first duty is to notify the insurance company and the bank. Thus, the insurance mechanism will be launched. Since the beneficiary, that is, the one who receives the money, is the creditor bank, all issues will be resolved at the level of financial institutions. However, the borrower should be interested in the progress of the process. Many borrowers fear that the money paid by the insurance company will not be enough to fully cover the debt. Banking and insurance officials argue that the occurrence of such a situation is impossible. When the insurance contract is renewed, the companies will agree on the amount of debt so that its entire amount is included in the policy.

Can I refuse insurance

Mortgage insurance is a legitimate demand. However, many borrowers seek to save money and avoid entering into an insurance contract. If the initial refusal threatens to increase the interest rate on the loan, then the refusal to pay the next insurance premium may have more serious consequences.

Banks stipulate the possibility of a sudden refusal of insurance in the loan agreement. For such cases, sanctions are provided, and quite severe. The bank may simply demand a one-time return of the entire remaining amount of the debt.

If desired, the borrower can change the insurancecompany. A new candidate must be agreed with the bank. Credit institutions do not cooperate with all insurance companies, but only with the largest ones. Therefore, the new insurer must also be on the approved list.

Both the bank and the borrower need protection, not an unforeseen event. It can be provided by mortgage insurance. Feedback from borrowers indicates that the choice of an insurer is no less important than the choice of a bank and lending conditions.