Life insurance for mortgage: What are the coverages?
A life insurance associated with a housing loan needs to cover occurrences so that banks allow the loan to be granted. The objective is for banks to protect themselves and have the loan amount reimbursed in case of a claim.
What does a life insurance cover in a housing loan?
The life insurance of the housing loan must cover, at least, the following occurrences: Death, Death by accident, Absolute and Permanent Disability (IAD), and Total and Permanent Disability / Definitive Disability for the Profession or Comparable Activity (IDPAC). It can also include coverage for serious illnesses, funeral expenses, or a second medical opinion.
Death
In order to protect themselves financially, banks require housing credit customers to take out death coverage in their life insurance policy.
So, if the borrower dies during the contract period, the insurance company is responsible for paying off the loan capital.
Accidental death.
Differing from the coverage above, there is also accidental death coverage. In other words, if the client suffers an accident, whether on the road or not, the insurance company guarantees the payment of the capital, according to the conditions established in the policy.
Absolute and Definitive Disability (IAD)
Coverage for Absolute and Permanent Disability (IAD) covers occurrences, diseases or accidents that result in a level of incapacity of the client of 80% or more.
In other words, if the insured becomes incapable of performing a paid activity and needs assistance from third parties for vital needs (vegetative state), with this coverage the insurer reimburses the loan to the bank.
Total and Permanent Disability (TPD) / Permanent Disability for Compatible Profession or Activity (PDCA)
Total and Permanent Disability (TPD) coverage includes incidents, illness, or accidents that result in the insured's incapacitation of 66% or more.
So, if the client becomes incapacitated, preventing them from earning income and carrying out their professional activity, life insurance guarantees the reimbursement of the mortgage loan to the bank.
ITP coverage is the same as the coverage for Permanent Disability for Compatible Profession or Activity (IDPAC), which can have either of the two denominations depending on the insurance company. In other words, if the insured customer loses an essential limb for the performance of their professional activity, their mortgage will be paid by the insurance company.
Serious diseases
You can also add coverage for serious illnesses that can anticipate the above coverages for death or disability.
If the client is diagnosed with cancer, myocardial infarction, or other diseases during the contractual period, the insurer will pay off the loan capital.
Funeral expenses
With the death coverage, you can also ensure that the insurer covers the expenses associated with the insured person's funeral.
Second medical opinion
The coverage of second medical opinions also goes hand in hand with coverage for serious illnesses. It may be necessary to obtain a second opinion and, by purchasing this coverage, you ensure the payment of this expense.
Regarding housing credit, these are the most common coverages of an associated life insurance. Anything that implies the insured being unable to earn income and pay the monthly credit installments, banks require you to take out insurance.
The life insurance premium will depend on both the coverage you choose and the profile and age of the client.
The more coverages you hire, the higher the premium will be, and the older you are, the higher the premium will also be. However, the more policyholders included in the insurance, the lower the premium will be.
Are there more questions regarding life insurance? The insurance brokers at Poupança no Minuto can help. Through a free, fast, and accurate service, they ensure that you contract the most suitable life insurance for your mortgage.