Perhaps you have gone to inform your bank about the possibilities of acquiring a mortgage to buy an apartment and you have been surprised by the fact that you should also pay for damage insurance. The truth is that the regulations governing the mortgage market require that if we want to own a property, on which a mortgage falls, we must have insurance against damage appropriate to the nature of it. In this way, it is normal for our bank to demand it from us when granting the mortgage.
Although it is popularly known as home insurance, in reality it is a damage insurance that must only have coverage for fires, natural elements, hail or frost. It should be borne in mind that the sum insured must coincide with the appraised value excluding the value of the land.
IN HOME INSURANCE ONLY THE OWNER OF THE INSURED PROPERTY IS ENTITLED TO RECEIVE COMPENSATION
Damage insurance and, in general, home insurance are indemnifying. That is, only the owner of the insured property has the right to receive compensation. For this reason, it is necessary that the policy includes a clause of transfer of rights of the owner in favor of the financial institution. Thus, in the event of a loss, it will be the bank (owner of the insured property) who will be able to collect the compensation to rebuild the property.
This damage insurance is, therefore, the only one that the bank can demand and will only cover the continent (the property). However, perhaps we can also be interested in home insurance that protects the content (the assets that we have in it) at the same time.
What should not be mandatory in any case is having to contract this home insurance with the insurer that the financial institution suggests when signing the mortgage. However, it is usual that this is required, at least during the first year.
THE PRODUCTS THAT BANKS OFFER NEXT TO THE MORTGAGE TEND TO BE MORE EXPENSIVE THAN THE AVERAGE
The problem is that often the products that banks offer next to the mortgage are usually more expensive than the average, so I recommend that you consult previously with other insurers if they can offer you more competitive prices for the same type of coverage.
Even so, keep in mind that the bank will always have the last word and, if you do not want to accede to our requests, you can deny us the mortgage loan or make us pay more interest as a counterpart. Sometimes there is no alternative but to do accounts and see what comes out most: paying more differential and saving on insurance or contracting all services directly with the bank and having a lower mortgage rate.
As you can see, hiring a mortgage is not a simple task and, in addition, requires that we pay attention to the smallest detail. Do not forget that, if formalized, it will be a significant monthly amount that we will have to face for years. For this reason, in case of any doubt, it is preferable that you have the advice and supervision of an expert professional.