Why do banks require a mortgage-approved client to make a life insurance?

Surely you think you know?

Do you think the question is strange or – let’s just say it – dumb?

Life insurance was needed in order for the insurer to repay the consolidated loan amount in case the person unexpectedly catches the passenger train without a return ticket.

In other words – if the person who drew the credit is dead, the bank takes the money from the insurer.

It is logical to think that the purpose of life insurance is really to repay your credit if you are no longer there.

It is logical, but not always true!

That is why we argue that the main purpose of the borrower’s life insurance required by banks is NOT to guarantee the bank’s money in case of death of the client:

  1. Not all banks require mandatory life insurance of the borrower!

Consider that property insurance is absolutely and unconditionally mandatory – always with all banks. But not life insurance. Yes, the life insurance can bring you some bonuses on the consolidated loan / a bit lower interest, say, but the lack of one will not frustrate your credit. At least in some banks.

Does it have “smart” banks that require life insurance and “stupid” banks who have not thought of defending themselves and do not require such insurance?

  1. Some banks will offer you to make life insurance for 5 years … regardless of the term of your consolidated loan!

This means that even if you have taken a consolidated loan for a 30-year period, the bank agrees that life insurance will be for a period of 5 years. And when the 5 years expire, you have no commitment to renew your insurance. Yes, you can check it out! You are under no obligation to renew your insurance.

Do some banks expect that there is a risk of being mentioned only during the first 5 years of the consolidated loan?

Or do borrowers develop special “immunity” after 5 years of mortgage payments?

And maybe some banks just do not care if something happens to you … Maybe they do not care if there’s anyone to get their money back if you go to that vacation?

  1. Some banks will offer you to make a life insurance savings instead of standard risk insurance!

Savings insurance deserve a separate article, but for now it is important to know about them two things. There are banks that agree that the life insurance has a certain minimum monthly payment – which may not cover 5% of your credit!

By signing savings, after 2 years you can use part of the accumulated overdraft.

Here are two jokers who will bring some clarity to the apparently illogical behavior of bankers:

First Joker: If you have taken credit and rest – your heirs, accepting the inheritance, accept your credit. Ie. your children, parents, brothers and sisters, etc. are required by law / unless they give up on the inheritance in good time / continue to pay your consolidated loan installments.

Second Joker: When you make a 5-year life insurance – you are required to pay the premium (ie. the total amount of insurance you owe for this period / purchase. If you do not have that much money, the bank can help you pay the entire premium for you and add it to the credit amount. Naturally, you will also pay interest on this amount.

Now we will ask you again the question we started with:

Why do banks require a mortgage-approved client to make a life insurance?

Do you still think that the question is strange?

How does it seem to you the hypothesis that life insurance is just another product that the bank elegantly sells to you . Having a credit card such as overdraft, such as using SMS notification like the egg in the store …

Warning !!!

We really like to point out that life insurance is something extremely important and useful when a person uses credit!

But it is important not for the bank, but for the borrower himself!

Therefore, when taking such an important step as using credit …

Do not leave anything as important as casual life insurance, which will cost you little money and can protect your children from credit slaves !

 

Categories:Loan Consolidation
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