Can the bank force you to take out insurance along with your mortgage?


We recently published a post with some important tips to bear in mind before you sign your first mortgage.

One of them mentions a practice that is common among banks: offering a lower interest rate if you meet certain conditions, such as taking out an insurance policy with a company chosen by the bank.

Before you decide whether to purchase the insurance from the bank or to look for other options, we suggest that you carefully weigh up the cost of the insurance offered and the relationship you envisage with the bank in the future.

Under Law 5/2019, regulating real estate credit agreementsAbre en ventana nueva, which came into force on 16 June 2019, banks may require you to take out specific insurance when they grant you a mortgage, such as:

  • Insurance to guarantee that your loan agreement obligations are met.
  • Insurance to cover any damage to the mortgaged property.
  • Any other insurance required under mortgage market regulations.

      However, remember that the bank must:

      • Accept alternative insurance from any other company offering terms and conditions similar to those proposed by the bank when the insurance is initially taken out and each time it is renewed.
      • Not charge any fees or expenses for assessing the alternative insurance policies you may propose.
      • Not offer you less favourable loan terms when accepting alternative insurance.

        Moreover, the bank has to inform you of the effects of not purchasing such insurance or cancelling it early.

        Lastly, the bank must provide you with information about the insurance you need to get a mortgage. This should feature in the pre-contractual information sheet (FIPRE, by its Spanish abbreviation) and in the European Standardised Information Sheet (FEIN, by its Spanish abbreviation). You should receive both documents at least 10 calendar days before the mortgage is to be signed.


        For more information about taking out mortgage-related insurance, go to our section on mortgage insurance.

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