What insurance can the bank require me to take out for my mortgage?

It can require you to have buildings insurance on the mortgaged home, which is compulsory. It can also ask you for insurance to secure the loan, such as life insurance. But it cannot make you take them out with the insurer of its choice. It must accept policies from other insurers that offer equivalent terms and cover, both at the outset and at each renewal, without charging you anything to review them or worsening the terms of the loan. What it can do is offer you a lower interest rate if you take out its insurance.

Alburquerque Abogados

José Manuel Alburquerque
Insurance law

Buildings insurance

  • The mortgaged home must be insured against fire and other damage.
  • The sum insured must match the valuation, excluding the land.
  • You can take it out with any insurer you like. The bank is usually named as beneficiary.

Life insurance

  • The bank can ask for it as security for the loan, but it must accept a policy from another insurer if the cover is equivalent.
  • It cannot charge you fees for reviewing it or worsen the terms of the loan because you chose another insurer.
  • The right to move the policies to another insurer comes from the 2019 “ley de crédito inmobiliario”, Spain's Mortgage Credit Act. It applies to mortgages signed on or after 16 June 2019 and to earlier ones that were later modified or moved to another bank. For an older mortgage, check what the mortgage deed says.

Interest rate discounts

  • The bank can lower the interest rate if you take out insurance or other products with it. This is lawful, but it must also offer you the loan without them and explain what happens if you cancel them.
  • Compare the saving on interest with what the insurance costs each year. Sometimes the insurance costs more than you save.
  • If you later give up that insurance, the bank can withdraw the discount.

This answer is provided for educational purposes and offers initial guidance on the question raised. Every matter has its own circumstances and nuances that require individual assessment. For that reason, before taking decisions with significant consequences, it is advisable to consult a professional and not to rely solely on this information. Personalised advice makes it possible to apply these explanations to the specific case and to assess the options available with greater certainty.