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Protect real estate loans with life insurance

Many people have life insurance or life insurance. The latter can be useful, among other things, when taking out construction finance to buy a property as security in an emergency. There are a few things to keep in mind.

The dream of owning your own four walls is usually realized through a real estate loan.

Most people in Germany have life insurance that pays an amount to the family and / or surviving dependents after the insured dies. Another option is to take out life insurance, in which an amount is paid for a certain number of years, which is paid out at the end of the agreed term. If the insured dies within this period, the money is also paid to the next of kin.

A life insurance policy pays an amount if the insured person dies during the agreed term. According to Versicherungsriese.de, life insurance is often taken out in combination with real estate financing. Such a life insurance policy can provide useful financial support for the bereaved. In particular, where a sole earner has to take care of his families, life insurance is absolutely advisable.


Free choice of insurer

Free choice of insurer

A bank can make your loan application subject to the condition that you take out life insurance, but you are free to take it out with an insurer of your choice. The differences in the premiums are considerable, so it is worth asking for several offers.


What is risk life insurance?

life insurance?

In contrast to life insurance, which is used to build wealth, risk life insurance has only one task: it should offer families the best possible financial protection in the event of death, which is why the principle must always apply to this type of life insurance : the sum insured must be high, but that is the case unfortunately not always the case. The Stiftung Warentest took a closer look at life insurance and found that most policyholders are not sufficiently insured.

Risk life insurance covers the financial risk of death during the life of the policy. You should know the following basics:

  • The person on whose life the insurance has been taken out is the insured person.
  • The beneficiary is the one who receives the benefit.

You can take out a life insurance policy for almost two insurers, for example for your own life and that of your partner. The surviving partner is usually the beneficiary, but your children can also be beneficiaries.


When is life insurance necessary?

When is life insurance necessary?

If you are thinking about home finance, you should be wondering if you need life insurance. A number of banks prescribe life insurance, for example for the part of the mortgage that exceeds 80% of the house value.

Whether compulsory or not, it is advisable to consider life insurance if you have a partner or if you have a family. First, find out what happens when one of you dies. What is your survivor’s pension? Is the surviving partner’s income or savings sufficient to continue living in the house?

If there are children, the parent left behind may be able to work less or the cost of childcare may increase. Then the financial blow will be even harder. Life insurance in any case relieves financial pain.

What good is risk life insurance if the family eventually becomes social assistance and loses its own home? This scenario occurs more often than some people think, and it always happens when the insured person does not take out a policy, or if it does not have an appropriate policy (underinsurance). The Stiftung Warentest therefore recommends that anyone wishing to take out life insurance should multiply their gross annual income by three to five.

If you also have a real estate loan, you should expect it. For example, if the main earner of the family earns $ 60,000 a year, the sum insured by life insurance should be $ 360,000. If it is a loan of 100,000 dollars, it should be 460,000 dollars.


Health issues in life insurance

Health issues in life insurance

Anyone who takes out life insurance has to fill out health issues. If you exceed a certain sum insured, the insurers will request a health check. If you are not healthy, the insurer can increase the premium. In this case, you are not obliged to take out insurance, but you are not insured. If you need such insurance and are not healthy, start taking out the insurance in good time: it can take a long time for the insurance to be taken out.


Choosing the right type of insurance

Choosing the right type of insurance

There are different types of life insurance. Therefore, please consider the different options when choosing your insurance:

Classic life insurance

In this case, you agree a fixed payment amount with the insurer. This amount and the monthly premium remain the same for the entire term of the insurance. This makes sense, for example, if it is combined with a mortgage that does not require repayment.

Associated life insurance

This insurance is particularly suitable for couples. Here life is mutually insured. This ensures that couples are protected twice. You should discuss with your insurance advisor whether you opt for two separate life insurance policies or choose a linked risk life insurance policy.

Residual debt insurance

If you take out residual debt insurance, the sum insured is reduced by the same amount per year.

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