Rules of comprehensive mortgage insurance 108. Guarantee of safety of collateral: we conclude a mortgage insurance agreement

For many citizens, a mortgage is the only option for purchasing their own home. Therefore, people often turn to banks to obtain such a loan. To do this, it is important to meet numerous requirements, so only citizens who are solvent, responsible and have a good credit history can count on such a large loan. At the same time, banks additionally impose mortgage insurance. The purchase of an insurance policy for the purchased object is regulated by law, so it is impossible to refuse it. The purchase of life insurance is usually imposed by banks, so if borrowers refuse to purchase such a policy, they have to face high interest rates.

Mortgage insurance concept

Mortgage insurance is a special insurance that protects the lender from possible losses. They may arise if the borrower defaults or there are other reasons why it will not be possible to collect funds from the debtor by selling real estate purchased with a mortgage.

Such insurance is considered protection against credit risks. It is implemented through insurance of the purchased property, title or life and health of the home buyer. In this case, the lender is always the beneficiary, but only the borrower is the payer.

Who is developing the industry?

The development of such an insurance product is mainly carried out by the state, as the Government is trying to improve the conditions for citizens to obtain mortgage loans. In foreign countries, purchasing insurance is considered mandatory for citizens, but in Russia many people have a negative attitude towards such expenses. At the same time, changes are regularly made to the legislation regarding the rules for purchasing and using insurance.

Mortgage insurance can protect the borrower from many negative consequences, so if for some reason he loses the purchased home, the insurance company will have to return the mortgage.

Main types of insurance

When applying for a mortgage, the bank insists on purchasing different insurance policies. Only one of them is required by law, so purchasing insurance for the property being purchased is required. Other types of policies are not mandatory, so citizens may refuse to purchase them. This usually leads to the bank simply refusing to provide a loan or offering interest rates that are too high.

Mortgage loan insurance can be presented in several types:

• Insurance of purchased property. This policy is required by law because it provides protection against loss or damage to collateral. If an insured event occurs, the funds are returned to the bank for the loan by the insurance company. The cost of this type of mortgage insurance depends on the price of the property itself. Typically, insurance companies charge from 0.16 to 0.5% of the value of the property. The price is influenced by the likelihood of a particular insured event occurring.
• Life and health insurance. Such insurance covers the borrower's expenses if he becomes disabled or is diagnosed with an illness that prevents him from further working and receiving money. Additionally, it covers the entire mortgage loan if the debtor dies. In such circumstances, relatives will not have to take responsibility for payments. The terms of such a policy may vary significantly from company to company. Compensation will not be paid if a citizen independently takes his own life or gets into an accident while intoxicated. The price of such insurance depends on the remaining debt and also varies from 0.3% to 1.5% of the amount. Additionally, the borrower’s age and state of health are taken into account.
• Title insurance. Such a policy is considered specific. Based on it, the costs associated with the loss of the borrower's right to the purchased object are covered. This insurance policy option is usually used if an apartment is purchased on the secondary market, so there is a possibility that a citizen will have to deal with scammers. The cost of the policy ranges from 1.3 to 1.5% of the size of the mortgage loan.
• Complex. This policy is only offered by a limited number of insurance companies. It provides protection against a wide range of insurance risks at a fraction of the cost of purchasing multiple policies individually. The payment ranges from 0.3 to 2 percent of the mortgage amount.

The choice of a specific option depends on the borrower himself and the requirements of the banking institution.

Features of such insurance

The rules for mortgage insurance differ significantly from those used when purchasing a standard insurance policy. A special feature is that the beneficiary under the contract is not the client of the insurance company himself, but the credit institution that issued funds for the purchase of residential real estate.

If an insured event occurs as specified in the contract, the insurance company will pay compensation to the bank. The payment amount cannot exceed the amount of the outstanding debt.

You can buy a policy annually or for the entire loan term. The first option is considered the most acceptable, since under such conditions the financial burden on the payer will not be too high. Many borrowers call insurance payments when taking out a mortgage the thirteenth payment, since their size is approximately equal to the loan payment.

The loan agreement directly states the borrower’s obligation to insure the purchased property and his life. If a citizen refuses to purchase these policies, this may lead to early termination of the agreement, an increase in the interest rate, or other negative consequences.

Can banks legally require the purchase of a policy?

The need to purchase insurance is determined by the provisions of Federal Law No. 102, which indicates the need to insure the collateral represented by the apartment or house being purchased. There is no information about other types of insurance.

In Art. 935 of the Civil Code states that personal insurance must always be voluntary, therefore banks do not have the right to insist on the purchase of such a policy. But most banking institutions require the purchase of personal mortgage insurance. If the borrower refuses to comply with these conditions, he faces various negative consequences:

• refusal to provide a mortgage loan;
• significant increase in interest rates;
• early termination of the loan agreement, if this condition is specified in this document.

Some banks even require the purchase of title insurance, although clients may refuse such insurance. Judicial practice shows that banks often win such cases, since they have the right to refuse to issue credit funds without justifying the reason for such a decision.

What insurance events are included?

A mortgage insurance contract can be concluded directly with a banking institution or an insurance company. You will have to choose companies accredited by the bank. As a standard, when purchasing insurance for an apartment in order to obtain a mortgage, you are required to insure your home against various insurance events. These include situations:

• a fire that causes damage to the insured property, even in a situation where it occurs not in the apartment, but outside;
• different types of natural disasters;
• gas explosion;
• flooding caused by an accident in the water supply, sewerage or heating system, even in a situation where water entered the apartment from other residential premises;
• recording illegal actions committed by third parties, for example, robbery or vandalism;
• various aircraft falling on the apartment;
• identification of defects in the building, and they should not be known at the time of concluding the insurance contract.

Citizens choosing the optimal insurance should remember that if a policy is purchased with a minimum package of insurance events and services, then compensation is paid only in a situation where truly significant damage is caused to the home. Therefore, it will not be possible to obtain insurance if, as a result of flooding, the wallpaper is damaged or a window is broken by hooligans. Mortgage home insurance will help you avoid significant losses in the event of property damage. Therefore, such insurance is required by law.

Life insurance claims

People should prepare for significant expenses if they take out a mortgage loan. Life insurance is required by every bank, and if citizens refuse to take out such a policy, they usually face refusals or excessively high interest rates.

When purchasing such a policy, the insured person may receive compensation in the event of the following insured events:

• death of a citizen resulting from an accident or illness that appeared after the purchase of insurance;
• loss of working capacity, for which the first or second disability group must be registered.

Other significant conditions for receiving compensation are specified directly in the contract drawn up with the insurance company.

Where to buy insurance?

Banks insist on purchasing policies exclusively from accredited companies. Some large institutions offer their own insurance.

The most famous are the insurance policies of Sberbank, Alfa Bank and Sogaz. Each organization has its own conditions and requirements for insured persons.

The nuances of purchasing insurance at Sberbank

Many citizens prefer to apply for a mortgage at Sberbank, since this organization is considered large, reliable and offers favorable conditions. In this case, the company issues mortgage life insurance. Sberbank offers a policy for property, the value of which should not exceed 15 million rubles.

To purchase a policy, 0.25% of the outstanding balance is paid. Therefore, mortgage insurance at Sberbank will be cheaper every year.

Insurance at VTB

VTB offers the opportunity to purchase only comprehensive insurance. An agreement is concluded for the entire term of the mortgage loan, but the validity of the certificate is required to be renewed annually.

The cost of insurance is 1% of the mortgage loan. The interest rate decreases annually if there are no problems repaying the loan.

Insurance at Alfastrakhovanie

Many people, when applying for a mortgage at Alfa Bank, buy a policy from the Alfastrakhovanie company. Mortgage insurance is offered under the following conditions:

• the application can be submitted via the Internet;
• the application is considered promptly;
• each borrower has its own insurance cost, which depends on the balance of the mortgage debt;
• We offer comprehensive insurance that covers risks associated with the borrower’s inability to repay the loan for various reasons;
• property, life and title insurance is provided;
• an agreement is concluded for the entire term of the mortgage loan, and the agreement terminates at the moment when the loan is fully repaid;
• contributions are transferred annually.

If the borrower plans to repay the mortgage early, he can count on recalculation of the cost of insurance.

Insurance in Sogaz

Quite often, people turn to the Sogaz insurance company to purchase a policy. Mortgage insurance is a sought-after offering from this organization. Risks in the event of the borrower's death or disability are insured. If a citizen registers a disability of the first or second group, then the mortgage is repaid by the insurance company.

The cost of the policy depends on the remaining debt, so every year you will have to contact the bank to obtain the appropriate certificate. The price is set within 1% of the outstanding balance. When purchasing a policy, each citizen can choose additional services that increase the cost of insurance, but at the same time the number of insured events increases, upon the occurrence of which compensation is paid by the company.

How is the contract drawn up?

Mortgage life and apartment insurance may be offered in one agreement, but most often two agreements are required. To do this, follow these steps:

• a suitable insurance company is selected;
• the necessary documents are transferred to the employee of the organization;
• insurance cost is calculated;
• the citizen studies the proposed agreement;
• if the parties agree to all the terms, the agreement is signed;
• insurance policy is paid.

The insurance will have to be renewed annually, and if a citizen refuses this process, this may lead to an increase in the interest rate or early termination of the contract.

Conclusion

When taking out a mortgage loan, you have to deal with the need to purchase insurance for the borrower’s apartment and life. Insurance claims may vary significantly from company to company. You should choose organizations accredited by the bank where you plan to obtain a mortgage.

When choosing a company, not only the cost of insurance is taken into account, but also related services. Refusal of insurance can lead to numerous negative consequences for the borrower, for example, an increase in overpayments and rates, and often banks terminate the loan agreement and demand a refund.

Basic mortgage insurance programs provide financial protection up to the extent of your mortgage debt.

The Mortgage Advantage product allows you to create a cash reserve for the full cost of the property. In the event of an accident, you will have the opportunity to purchase similar housing, carry out restorative repairs in your apartment and your neighbors’ apartment, receive cash in case of injury or even loss of job!

The Mortgage Advantage policy has become even better and provides reliable insurance protection with the following coverage

Property insurance in case of:

• Fire, explosion, lightning strike.
• Exposure to liquid.
• Natural Disasters.
• Illegal actions of third parties.
• External influence.
• Liquid spillage from household appliances.
• Fixing electronic equipment and electrical appliances.
• Breakdown of water supply systems due to freezing or thawing of water (“Winter package”).

Civil liability insurance in case of:

• Causing damage to the life, health or property of third parties due to the operation of real estate, including during the period of repair and finishing work.

Personal insurance in case of:

• Death and disability due to accident and/or illness.
• Temporary loss of ability to work as a result of an accident.

Job loss - insurance in case of:

• Termination or restriction of property rights.

Maximum protection for you and your property

How does Mortgage Benefit work for property insurance?
Example:

• The cost of your apartment: 5,000,000 rubles.
• Mortgage loan amount: RUB 3,000,000.
• Own deposited funds: RUB 2,000,000.

If an insured event occurs, your debt to the bank is in the amount of RUB 3,000,000. covered by basic mortgage insurance.
The amount is 2,000,000 rubles. will be paid to you under the terms of the Mortgage Advantage program*.
Moreover, this program will cost you only 3,000 rubles. in year.**

Buying a policy is easy and quick!

Contact your mortgage insurance manager and he will make all the necessary calculations.

Full information about insurance risks, other insurance conditions, as well as current restrictions within the Mortgage Advantage insurance product is contained in the Comprehensive Rules for Insurance of Residential Buildings, Premises, Household and Other Property, the Rules for Comprehensive Mortgage Insurance, the Rules for Voluntary Job Loss Insurance, posted on the website www.site.

* Subject to complete loss of property.
**The calculation results do not constitute an official offer of SK VTB Insurance LLC.

Check the cost of the policy with your insurance manager.

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