How to choose mortgage insurance: the most popular questions

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Concluding an insurance contract is an invariable attribute of obtaining a mortgage loan. Attempts to refuse the services of an insurance company in most cases end in failure. Or the interest rate on the loan increases significantly.

There is an opinion that insuring life and apartment every year is not a mandatory service. Is this really so and what should a borrower who is not ready to overpay a significant amount do? We will also discuss in the article what advantages the purchase of “imposed” policies provides.

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What is home and life insurance on a mortgage?

Before receiving a loan to purchase housing, a banking organization insists on concluding an insurance agreement. The lender's goal is maximum security of the issued funds. When insuring the life or health of the debtor, the insurance company pays the remaining amount of the mortgage to the bank if the borrower dies or receives 1st or 2nd degree disability. A separate clause in the contract stipulates the situation in which the policyholder goes on long-term sick leave.

If the borrower refuses to purchase the above policies, there can be two developments:

Refusal to purchase an insurance policy for a property will result in the inability to receive funds. After all, this is a mandatory condition, according to Federal Law-102, Article 31 “On Mortgage”.
Failure to purchase a life insurance policy will cause your mortgage interest rate to increase.

Attention
According to Federal Law No. 102, Article 31 “On Mortgages” states that issuing a policy on collateralized property is a legally mandated obligation for the mortgage borrower.

Is it necessary to insure life and apartment every year with a mortgage?

For a banking organization, life insurance of the borrower is an additional guarantee of the security of the funds issued to him for a mortgage. When an insured event occurs, and this concept includes the death of the borrower, disability of 1 or 2 groups. As well as sick leave for more than 30 days. That is why lenders insist on issuing a life insurance policy for a mortgage, so that in the event of an unforeseen situation, the insurance company will either pay off the borrower’s debt in full or take over payments for his obligations for a certain period (when taking out a long sick leave). Therefore, life insurance does not have to be renewed every year.

IMPORTANT

Life insurance is not a requirement for obtaining a mortgage loan. And you can refuse it. But in this case, some banks increase the interest rate, which makes refusal to purchase a policy pointless. At the same time, if an insured event occurs, the presence of a policy significantly facilitates the financial situation of the mortgage borrower and his family.

But the situation with purchasing a policy for an apartment that is pledged to a banking organization is completely different. According to Federal Law No. 102 “On Mortgage”, Article 31, the borrower is obliged to insure the collateral property and renew the insurance every year.

Attention

Even a short break in the validity of an apartment insurance policy can have serious consequences for the debtor. The bank has the right to go to court with a demand for full early repayment of the loan. Or sell the mortgage debt to collectors. Which makes the borrower's situation even more dire.

What happens if payment is late?

If payment is late, the insurance premium must still be paid, otherwise proceedings or penalties will follow.

Related article: What is property loss insurance?

In this case, the client must take into account:

if the validity period of the agreement has been missed, then you need to contact the insurance company department and rewrite the agreement or try to extend it;
if a delay occurs, but the contract remains valid, then the debt must be paid in full - then no measures will be taken.

Based on the law, it is not possible to evade insurance premiums. The signature is considered legally valid, therefore the person undertakes to fulfill his obligations. Banks also have the right to force the borrower to work with a specific insurance organization. A person has the opportunity to study the entire list of accredited companies and choose the one that covers the borrower’s needs. Prices for different insurance companies can vary significantly, so it’s worth thinking about the choice.

How much does mortgage life insurance cost?

The cost of a life insurance policy for a mortgage is calculated by an insurance company employee at the time the client applies. In most cases, the amount of insurance will be from 0.5 to 1.5% of the amount of debt to the bank. When calculating the cost of the policy, factors such as:

Floor. For women, the risks are lower, so the optimal solution would be to issue a loan to the woman, and the husband can be made a co-borrower. This will reduce the cost of purchasing a policy by 30-50%.
Age. The older the insurance company client is, the higher the coefficient will be. Many companies refuse life insurance to borrowers whose age category is 60+.
Chronic diseases also have a negative impact on the cost of the policy.
Health status. A mandatory condition will be to undergo a medical examination. Based on the results of the survey, the insurance company specialist makes a conclusion about the advisability of using an increasing coefficient.
Excess weight will also become an aggravating factor.
Professional activity. If the work involves health risks, then the cost of the policy will be much higher.
Loan amount. The higher it is, the more increasing factors will be used by the insurance company.

Please note:
To choose the best cost life insurance policy, experts recommend contacting several insurance companies and calculating the preliminary insurance amount taking into account all factors.

How much does it cost to insure an apartment with a mortgage?

Purchasing an apartment insurance policy is a prerequisite when applying for a mortgage loan. Its cost depends on several factors:

Time frame for building a house.
The property was purchased on the primary or secondary market.
Floor material (concrete/slab/wood).
Material and condition of the roof.
The general condition of the house and apartment in particular.
Conditions of engineering communications (sewage systems, water supply, gas supply, electrical wiring, etc.).

The average cost of obtaining an insurance policy varies among different companies and ranges from 0.5 to 1.5% of the remaining loan amount. The amount of payments under the policy upon the occurrence of an insured event is equal to the market value of the property.

What is an apartment construct

The term “constructive” refers to various structural elements of an apartment, the violation of the integrity of which can significantly affect the estimated value of this property. These include:

Load-bearing walls, non-load-bearing walls, permanent partitions, partitions.
Ceilings/floors.
Entrance doors, balcony doors. Interior doors do not need to be insured.
Loggias and balconies in the complex (ceilings/floors, walls, glazing).
Window units together with double-glazed windows or other types of glazing.

How to profitably insure life and apartment with a mortgage?

To make life and apartment insurance for a mortgage as profitable as possible for the borrower, factors such as:

The longer the policy period, the more profitable the insurance will be.
It is better to register your wife as a borrower. For women, the coefficient is not as high as for men when purchasing life insurance every year.
Many insurance companies offer a discount to their clients if they prefer to issue a policy online rather than in person at the company’s office.
Ordering a preliminary calculation of the cost of the policy in several insurance companies will allow you to choose the best option for the price.

Carefully study the offers of insurance companies and do not agree to the insurance policy offered by the bank. Often, the cost of the policy will already include a bank commission. And its size can be 10-20% of the total amount.

How to insure an apartment with a mortgage

There are no special differences in obtaining insurance for a mortgaged apartment from the procedure for signing a regular contract with an insurer. The only difference is in determining the duration of the contract and the included list of risks.

The sequence of actions is presented in 4 steps:

Check with the creditor bank for a list of accredited insurers who are allowed to issue a mortgage policy. Sberbank has about 2 dozen such organizations.
After studying the programs, they select the most profitable and reliable insurer and request a package of documentation necessary to issue a policy.
After submitting the documents and completed application, the price of the policy is agreed upon and a signing date is set.
Before concluding a contract, carefully study its text and conditions (insurance period, conditions for payment of compensation, description of the signs of an insured event).

By the time you receive credit funds for settlements with the apartment seller, the agreement must be signed and presented to the bank.

Step-by-step instructions for obtaining life and apartment insurance for a mortgage

To make the process of obtaining life insurance and collateral real estate as comfortable as possible every year after receiving a mortgage, you should follow a simple algorithm of actions:

Select one or more insurance companies. Clarify the required package of documents, as well as the terms of the contract.
Collect a package of documents. It includes a passport of a citizen of the Russian Federation, a loan agreement, an application, a copy of the cadastral passport, a questionnaire (it must indicate personal data and characteristics of mortgage lending), a medical certificate (confirming the state of health based on the results of the examination, not required by all insurance companies), documents for real estate object.
Order a preliminary cost estimate for the policy from selected companies. This will allow you to choose the most comfortable mortgage insurance program.
Compare offers. When choosing, you need to take into account not only priority tasks (for example, the speed of issuing a policy), but also its cost, payment period, and ease of working with a representative of the insurance company.
Visit the office of the selected insurance company and sign the agreement.
Clarify whether the company representative transfers a copy of the insurance contract to the banking organization independently or is this your responsibility.
Pay the amount specified by the agent and, if necessary, personally deliver a copy of the agreement to the bank.

For your information
If the main goal is the speed of issuing a policy, then many borrowers every year choose the Sberbank-Insurance program. An undeniable advantage is the ability to purchase insurance without leaving the walls of your office or home. To do this, just go to the website and purchase a mortgage insurance product within a few minutes.

Repayment of insurance premium

Each agreement with third-party companies takes into account the payment procedure:

One-time payment. It says that a person pays the entire amount under the agreement. This option is usually used when concluding a life insurance contract. Money is paid immediately after signing the papers.
Periodic payments. To do this, the client deposits money during the entire period of the agreement. In this case, the payment will be as follows:

One-time fee. To do this, a period is assigned when you need to deposit it. Let's say within 2 weeks, and not immediately after signing the papers.
Subsequent payment. This suggests that the amount can be divided into several parts. And the repayment of each share indicates the continuation of the insurance.

Splitting payments sometimes allows you to protect yourself from cooperation with bankrupt companies. This will also help you end the agreement quickly. It is enough not to make the next payment for it to be cancelled.

Some organizations have a practice of increasing the price of the amount if the client asks to split the payment over six months, quarterly. The contribution amount increases by 10-20%.

Sometimes payments are included in the body of the loan, then the client simply pays additional interest on this amount. The debt is also spread over the entire loan term. Suitable for those who incur high transaction costs during the period of signing a mortgage.

We have collected original reviews on this topic here, reviews from real people, many comments, worth reading.

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How to refuse mortgage insurance?

Experts recommend resolving the issue by waiving voluntary life and health insurance, as well as title insurance (for real estate purchased on the secondary market) before signing the mortgage agreement. In this case, the procedure should be as follows:

Study the mortgage agreement. Clarify whether the banking organization provides for a change in the interest rate if the borrower refuses the imposed types of insurance for each year of the mortgage.
Write an application addressed to the credit manager assigned to your agreement. The application must notify you of the refusal to purchase the policy.
Having submitted the application in two copies, it is necessary for the employee to put his signature on one of them. Thus, this will be additional confirmation that the bank has notified the borrower’s intentions.
You should also call the Customer Support Center and try to resolve the issue promptly.

If, based on the results of all actions, the bank does not want to make concessions, then proposals from other credit institutions should be considered.

Responsibility for non-renewal of life and apartment insurance with a mortgage

The legislative framework of the Russian Federation does not provide for any penalties or other punishment for the borrower’s refusal to renew the life and health insurance policy for a mortgage every year. Therefore, in the second and subsequent years, you can safely cross out this expense item from the family budget. Of course, only if the borrower himself wants it. However, your mortgage interest rate may increase.

But refusing to insure collateral (an apartment purchased with a mortgage) will not work. In this case, the optimal solution would be to renew the policy in a timely manner. Because in the event of a break in the insurance period, the insurance company independently transmits information to the lender. And the bank begins to charge a fine. If the borrower does not respond and does not renew the policy or pay the penalty, then the bank can either sue to the court demanding early repayment of the remaining mortgage debt, or transfer it to collectors.

Which company to choose (by price and payments)

For example, when selecting an insurer, it is better to take into account the base rates. In this situation, the picture will be more objective. But from the list below, you should choose a specific company using an online apartment mortgage insurance calculator. You will find this program on the websites of these organizations.

SOGAZ - offers favorable rates from 0.08% (title policy), several types of products (personal insurance, constructive, civil liability, title), but there are problems with payments.
Apartment mortgage insurance in RESO starts at 0.10%. For the title and personal policy you will have to pay 0.26 and 0.25%. They offer discounts from 5 to 20%, and it is possible to purchase a comprehensive policy.
In Ingosstrakh, apartment insurance for mortgages is carried out at a rate of 0.14%. The company works with most major banks. Reviews about payments vary. In case of fires and floods, the company regularly pays amounts. But for larger damages, you will have to work hard to get what you are owed under the policy.
make an apartment mortgage insurance calculation with Alfa online. For a constructive policy you will have to pay 0.15% of the loan amount.
Sberbank offers to purchase real estate protection for 0.25%, and a personal policy will cost 1% of the loan amount. This company pays regularly when insured events occur.
It costs 0.17%. A personal policy costs 0.28% of the loan amount. If the borrower is female, this company provides lower rates. There are no special problems with payments.
Tariffs in this company are higher than others. For a personal policy you will have to pay 0.55% of the loan amount. In VSK , apartment insurance with a mortgage will cost 0.43%. Feedback on payments here is mostly negative. They either pay less money or the application is rejected.
The rate for all types of products at VTB starts at 0.33% . The company offers only a comprehensive policy, which includes several types of risks. If we take into account the reviews on payments, VTB apartment mortgage insurance is not the most profitable.

Recommended article: Mortgage insurance – which is required?

As a result, if we consider the proposals of insurers taking into account not only basic tariffs, but also the chances of receiving payments, then the most suitable conditions are guaranteed by: Sberbank, RESO, Ingosstrakh and Rosgosstrakh. In this case, it is necessary to correctly and timely notify the company about the occurrence of an insured event. Otherwise, the likelihood of timely payments in full is reduced.

Responsibility for non-renewal of mortgage insurance using the example of Sberbank

Let's look at the example of Sberbank, which methods of calculating penalties are used by lenders for untimely renewal of an insurance policy on collateral for a mortgage every year.

The amount of the penalty is calculated based on the annual interest rate. For example, if the mortgage is issued at 10% per annum, then to calculate the amount of the penalty the value of 5% will be taken into account.
Then the number of days of delay is determined. It is the interval between the expiration date of the previous policy and the beginning of the new one. Let's say 30 days.
The balance of the debt to the bank is taken into account. For example, 600 thousand rubles.
Total, we get: 600 thousand rubles * 5% (1/2 the annual loan rate) * (30/365). We get the amount of the penalty equal to 2465 rubles.

Using this simple formula, you can independently calculate the amount of the penalty.

Attention

If the policy was purchased in advance, and the bank began to charge penalties, then the only option would be to immediately provide copies of insurance contracts. Based on them, the employee will make adjustments to the program and the penalty will be removed from the debtor.