Mortgage life insurance in Spain: when the bank can require it and when it's optional

A bank cannot require you to take out its life insurance to grant you a mortgage: Law 5/2019 bans tied sales. What it can do is offer a discount on the interest rate if you take it out, and that's where the trap lies: the savings on your monthly payment may be smaller than what you pay for the policy.

Let no one be misled: in Spain, a bank cannot make the granting of a mortgage conditional on you taking out its life insurance. **Law 5/2019**, which regulates real estate credit contracts, expressly prohibits tied sales. If someone tells you there's no loan without their insurance, that claim doesn't hold up.

## Combined sales: a discounted rate in exchange for insurance

What the law does allow is combined sales. The bank can offer you a lower interest rate if you take out the life insurance with them. It's the typical discount of **0.10 or 0.20 percentage points**. It sounds good until you do the math.

The problem is that many people accept the discount without calculating. The bank's insurance is usually among the most expensive on the market, and its annual cost can far exceed what you save on your monthly payment. To find out, you need to compare the **APR with and without the conditions attached**, which appears in the FEIN, the European Standardised Information Sheet.

## You can bring a policy from another insurer

Even if you accept the discount, you are not obliged to take out the insurance with the bank. You can present a policy from any insurer, as long as it covers what the institution requires. It's worth getting a quote elsewhere before signing.

Different is the insurance on the mortgaged property. There the bank does usually require the home to be insured for the duration of the loan, because it is its collateral. But you can also choose the insurer freely. It doesn't have to be theirs.

## What to check before signing

Look at the FEIN calmly: the APR with and without discounts, and how much your monthly payment would rise if you later cancel the insurance. Compare the annual cost of the policy with the savings from the discount over **5 or 10 years**, not just the first year.

Review the exclusions and make sure the capital covers at least what you owe. Ask in writing what happens if you cancel the insurance later: how much the rate rises and from when. And do the math on your budget, because the monthly payment plus the insurance has to fit without drowning you.

## Insurance required by law and insurance that suits you

For life insurance, the answer is almost never: it is not required by law to obtain a mortgage. It's another matter if you decide to take it out because you have a family depending on you and want them covered if something happens to you.

These are two different decisions. One is the bank imposing its insurer at its price, and it cannot do that. The other is you choosing to insure yourself. It's best not to mix them up. Before signing any condition, check the FEIN and, if in doubt, consult an independent financial adviser.