Do You Need Life Insurance to Get a Mortgage in Spain? A Complete Guide

So you’ve made your dream move to Spain, and now you’re thinking of buying a house. While speaking with banks and lenders, you might have noticed different mortgage rates available, with and without certain benefits or incentives. Life insurance is a common add-on that banks provide in return for a reduced interest rate. But do you need life insurance to get a mortgage in Spain? Do you need to take it out with your bank or can you choose your own policy? This blog post will explain the ins and outs of life insurance in Spain. 

What is life insurance?

Life insurance is a special type of insurance policy that pays out a sum of money either on the death (or in some cases, disability) of the insured person, or after a set period of time. The payout provides financial support to the beneficiary, usually a member of the policyholder’s family, to help cover expenses like funeral costs, living expenses, or outstanding debt. This can be especially important if the deceased person was the primary or sole income earner in the family. 

How does life insurance work?

Every life insurance policy is different, but typically the policy holder pays regular premiums or a lump sum to the insurance company. In return, the insurance company agrees to provide a payout (often called a death benefit) to the beneficiary. 

Factors that may influence the premium include: age, health, lifestyle, and the amount of coverage in the insurance policy. Some policies also offer benefits for critical illnesses or disabilities.

Do you need to take out life insurance with the bank to get a mortgage in Spain? 

While it's not mandatory to have life insurance when taking out a mortgage in Spain, it can provide certain benefits. Typically, in return for taking out life insurance with them, your bank will offer an incentive of a reduced interest rate. You are not obligated to take their insurance policy, but in this case, you will not get the reduced interest rate. In fact, the Spanish Mortgage Law allows you to choose your life insurance provider, and you're not forced to take the one offered by your bank. 

Many banks in Spain will try to pressure you into accepting their policy, but it’s advisable to compare different life insurance options and choose the one that best suits your needs. It's crucial to compare different life insurance policies, considering both the cost and the coverage offered, before making a decision. 

What are the benefits of taking out life insurance with your mortgage in Spain?

There are many reasons to contract a life insurance policy in Spain, and many of these advantages can be tied to your mortgage:

• Debt Protection: In case of death or disability, the life insurance policy may pay off the outstanding mortgage balance, preventing the debt from falling on your family. 
• Financial Security: It provides financial security for your family, ensuring they don't have to worry about mortgage repayments in difficult times. After your death, you’ll ensure you maintain their standard of living, cover debts, and pursue financial goals.
• Flexibility: You can often change your life insurance policy even after the mortgage is approved, allowing you to explore better offers in the future. 
• Potential for cash value growth: Permanent life insurance policies may accumulate cash value that can be borrowed against or withdrawn. This depends on the insurance policy you contract and will be specified in the details of the policy. 
• Peace of mind: This final benefit is priceless. Knowing that your loved ones will be financially protected can provide comfort in both the short and long term. 

Life Insurance with Caser Expat Insurance

Caser Expat Insurance is proud to offer life insurance policies to expats in Spain. We believe that protecting your family’s future is of the utmost importance, especially when you have children. 

For Caser life insurance, the price of the policy depends on factors such as age (the older you are, the higher the premium will be), the capital to be insured (the amount of the indemnities that the beneficiaries will receive), as well as personal aspects such as health, habits, and profession. All of this will be assessed when contracting your Caser policy. Find the types of Caser Expat life insurance below and their coverages which are included or optional: 

• Individual Life Insurance: Compensation is provided to the beneficiaries in the event of death, regardless of cause. Absolute permanent disability coverage is optional. 
• Starbien - Personalized Life Insurance: In addition to death, this life insurance also offers benefits in case of hospitalization or serious illness. Optional coverages include accidental decease, decease due to traffic accident, absolute permanent disability, serious illness for children and adults, and daily compensation for hospitalization. 
  

Useful Resources for Homebuyers in Spain

Mortage and life insurance. Interest rates. Agency fees...If you’re embarking on the journey of home ownership, we know that it can be daunting. Even more so in another country and another language. Life insurance with your mortgage isn't the only thing you should be aware of. The resources below will aid you along your way, with information about buying a home, home insurance, investing in a home, home downpayment, and more!

• Process of buying a home and getting homeowner’s insurance - This step by step guide details the documents you’ll need for buying a home in Spain, mortgage options, homeowner’s insurance, and taxes. 
• Pros and cons of investing in a house in Spain - Many expats use Spain as an investment market, but you have to know the advantages and disadvantages of doing so before taking the plunge. 
• How much deposit is required to buy a house in Spain? - A deposit on a home has always been 20% down, or is it? This article discusses the factors that can affect a downpayment on a home. 
• Do I need a Spain residence permit to buy a house? - Many people who come to Spain aren’t necessarily residents, but does this prevent you from purchasing a property? Find out!

Now that we’ve reached the end of our post, we just want to reiterate what was communicated above. While life insurance to get a mortgage is not a legal requirement in Spain, it's a wise choice to protect your family and ensure the mortgage is paid off in unforeseen circumstances. Caser Expat Insurance is here to guide you in your decision-making and offer you the best life insurance policies for expats.