Mortgage insurance can be very useful in difficult life situations. But of course it has its pros and cons. Covered insurance risks are most often death, permanent consequences of injury or disability, incapacity for work or loss of employment.
The increased interest in credit insurance in recent years is also contributed by the financial crisis and increasing labor market insecurity as well as the economic downturn in general.
Given the possible very serious consequences of the inability to repay a mortgage loan, it is definitely appropriate to consider quality credit insurance. It is best to consider this option before concluding the credit agreement itself, as not all banks offer this insurance and the terms of these products, which are usually firmly linked to a specific mortgage product, vary considerably. Most banks offer a 0.1 to 0.5% interest rate reduction for the policy. In the event of an insured event, the obligation to pay insurance premiums expires (permanently or temporarily depending on the type of insured event).
The price of insurance depends not only on the amount of the monthly installment, but also the duration of the policy or the age of the insured play an important role. Job loss insurance is part of even more expensive insurance products. In any case, insurance always accounts for a significant part of the total cost of a mortgage loan – usually 3 – 8% of the monthly installment. Therefore, it is always necessary to carefully consider the effectiveness of the money spent and to study in detail the conditions of specific insurance products, which usually involve a large number of different closures and specific constraints: the most frequent constraints are in particular the minimum duration of incapacity for work or unemployment.
The vast majority of insurers also offer monthly payments for a maximum of one year, but in some cases only for six months. It is also necessary to take into account that the entitlement to payment of insurance premium does not arise immediately, but only after a certain time delay from the occurrence of the insured event (usually it is about two months) and often also depends on the minimum duration of insurance.
Other insurance alternatives
When considering the conclusion of a mortgage loan policy, it is necessary to take into account other alternatives in the market of insurance products, such as life insurance, insurance of all regular expenses, etc. Apart from objective facts, an individual approach to risk also plays a role.