Term Life Insurance, Banks Abusing Clients Again

Over the last 2 days I have been advising buyers on mortgages and it seems that the banks are returning to their old ways so I am writing this just to warn people watch out

Spanish banks often insist that you take like and buildings insurance, from the bank and even discount the rate to reflct this, as with the UK they cannot enforce this but it is likely that the offer will be, no insurance, no mortgage. What some people advise is take get the mortgage, take the insurance for a year and then cancel or move, this is what I did because I have a number of life policies that I could use

Because the banks know about this, a more worrying trend, is the return of them requiring you to but, full term insurance, so you agree upfront to pay for insurance for the mortgage period and the cost is added to the mortgage. Real example yesterday, for a 20 year mortgage the life cover was €75 a month so they wanted to add €18k to the mortgage so the buyer would have topay this plus the additional interest and agian he is told if he doesn't agree to this no mortgage offer

Can you avoid this yes, although you pay a mortgage broker for their services they can often get better terms becaise of thier volume, this client ended up paying a slightly higher rate, 1.9% variable but there was NO obligation to take their insurances, yes he has to have life cover and is using an existing policy, big saving

Right now we have mortgages starting at 1.5% variable with some good availability but watch out for Term Insurance terms

Financial regulations don't appear to apply to Spain, Maria's opinion would be very interesting, this would be against FCA regulations in the UK.

Roy is correct

I took out a 15 year mortgage in 2008 . Although I didn't pay it up front,  the compulsory life insurance element was 60 euros a month. By 2014 it had increased to 90 euros a month. The only way out of it was to pay the mortgage early which luckily I was in a position to do late 2014. (Even then they managed to get an extra month out of me, because on completion of the mortgage I had to give a months notice to cancel the life insurance)

We took out a small mortgage as we'd been told at least the banks will be doing checks on the property. After getting burned by a builder that went out of business and an estate agents who, basically, lied to us, we thought it would be good to do so.

Yes, the house insurance was a condition of getting that mortgage. The bank (Bancaja as was) charged us €580 a year for this insurance and pointed out the condition in the mortgage contract. What we hadn't realised was that this was buildings insurance only and didn't cover contents. Considering the community insurance also covered we did feel we were getting ripped off.

Fortunately we paid the mortgage off after 10 months and cancelled the insurance. We took out full buildings and contents insurance which, after the company had checked the community insurance which doesn't cover everything, the cost was €190 for the year. Rather a big difference to the banks €580 for less coverage. 

If we'd had to pay so many years up front (as mentioned, €18k extra) we wouldn't have done it as that would have doubled the mortgage. 

Mind you, in UK some years ago the banks were also doing the same thing. My parents still had buildings and contents insurance costing over 500 quid a year which I cancelled and got them with Direct Line UK for £180. 

Mariedav,

If my memory serves, prior to freedom of choice in respect of UK buildings insurance, lenders used to charge a 'policy inspection' fee if you wished to arrange your own cover, this usually negated any saving you thought that you had made.

All that happens now is that you must insure for the rebuilding figure decided by the lender's valuer and have their interest noted on the policy document.

Hi Roy,

Just a quick thank you for putting us in touch with Tim, he`s been outsanding so thanks again.

Neville

No problem, a pleasure, we both know our stuff, me on sales Tim on the mortgage side

Yes, thanks for putting us in touch Roy!

You can cancel the Life Insurance contract within 30 days from the delivery of the policy: 

1.- Communicating your decission to the Insurer, mentioning you are using art 83.a of the Insurance Contracts Act, requesting the refund of the premium/s paid.

2.- If you find no satisfactory answer after this, you need to contact Clients defense department of the Insurance Company. They must reply to you within 2 months.

3.- If there is no positive answer after these two months, you can bring a claim before Claims Department of the  Dirección General de Seguros y Fondos de Pensiones, who must reply to you within 2 months.

Well Maria's post will do me, this sounds logical.

And with the speed of the Spanish Legal system you will wait a long time and spend money with the lasywers to get this resolved plus it isn't just the premium but it will be added to the mortgage paperwork, that the buyer signs

Surely better to just be warned that they do it and not agree

Roy,

This is why I would only use a broker, I'm not disagreeing with you.

No I understand that it was more Maria as a lawyer talking about the legal route in everything which I know from experience isn't easy or cheap in Spain

Maria is giving good advice for free of the legal situation.

We had the similar situation and difficulty in canceling at renewal time. Rules have changed slightly and with the help of Miguel we eventually got the exhorbitant bank insurance cancelled.

We had to show that there was a relevant insurance policy in place as part of the paperwork which was submitted in Spanish to the relevant head office department on our behalf. We should also have served it in person to our branch which would have made life easier.

Brits tend to leave their brains back in Blighty when they go property shopping over the water, they would never fall for plethora of three card tricks back home that they appear to accept as the norm when in foreign parts. I'd love to be a fly on the wall when the Spanish banker and estate agent have a laugh at what strokes they have pulled on the unsuspecting brits.

If it doesn't sound kosher simply say "no thanks" and walk away, I have long been an advocate of using the services of a broker, you wouldn't trust yourself to do the legal (well most wouldn't), so why not treat a loan in the same way?

After recent Supreme Court decision on Mortgage associated costs, these expenses can also be claimed from the Bank

I have recently inherited quite a lot of money from my auntie Maude. Should I take out some of this term assurance stuff.

You do whatever you wish ET, it's none of our business.

😉

You do whatever you wish ET, it's none of our business.

Yes quite agree - well said Destry

Thank you for your advice. You are both so kind and helpful. Truly as members an asset to EOS and even when you have no knowledge of a subject you still put yourselves out to comment. Thank you so much. Sorry I troubled you both.