When applying for a loan to purchase real estate, the borrower must enter into a comprehensive insurance agreement.

This service provides complete financial security for the bank and the person receiving the loans.

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What is this type of service?

According to the Mortgage Law, property insurance is mandatory.

Banks are interested in minimizing the risk of loan default that arises for various reasons:

• job loss;
• deterioration of health;
• property damage;
• loss of property rights.

Since the loan is taken out for a long period of time, financial institutions take all possible measures to protect funds.

This is how comprehensive insurance was formed, providing complete safety in various unforeseen circumstances.

It includes three product categories:

• protection of property from various risks;
• protection of the health, ability to work and life of the borrower;
• title protection (property rights);
• protection of the borrower's liability for non-repayment of debt.

People will be able to cover losses from the adverse consequences of different types of real estate: house, apartment, dacha and others.

The agreement is concluded for a period of 12 months and includes an extension until the end of the mortgage payment period.

The amount within which the insurer pays compensation is established in two ways:

• initial debt (interest for the current period is added);
• as a decreasing amount commensurate with the reduction in debt to the bank.

In what situations is monetary compensation provided?

The company compensates for losses from partial or complete damage to property as a result of:

• fire;
• lightning strike;
• explosion of steam boilers, gas;
• natural Disasters;
• subsidence and subsidence of soils;
• leaks due to failure of water supply systems;
• release of soil water;
• household gas explosion;
• falling flying objects or their fragments;
• collisions with vehicles.

Health and life insurance provides cash compensation for:

• loss of temporary working capacity of a citizen;
• disability;
• death caused by an accident.

Title protection obliges you to transfer funds to a credit institution if the following events occur:

• loss of property rights of the borrower;
• there was interference from third parties;
• a court decision was made to restrict property rights.

A debt liability insurance product is used in situations where the borrower is unable to service his debt.

This can happen for several reasons:

• additional costs as a result of default;
• insufficient funds after the sale of collateral real estate.

The insurance company does not compensate for damage caused in all cases.

Monetary compensation is not provided if:

• nuclear explosions;
• hostilities;
• radioactive radiation.

What are the advantages of such insurance?

Comprehensive mortgage insurance ensures the safety and stability of the real estate lending system.

In this regard, the borrower receives the following benefits:

• prompt decision-making regarding the execution of the contract;
• reduced interest rate on the loan;
• minimum down payment;
• loyal attitude of the bank to providing a loan;
• reasonable tariffing ensures economic feasibility, since an integrated approach combines several categories;
• guaranteed and timely financial compensation in the event of an insured event thanks to cooperation with one rather than several companies;
• Every year, insurance payments decrease as the amount of the principal debt decreases.

After concluding a comprehensive insurance agreement, the bank and the borrower will have confidence in the future.

Which companies and under what conditions provide comprehensive mortgage insurance?

Not every organization offers the service in question. Typically, several risks can be insured at accredited agencies of the bank where the borrower is applying for a loan.

To obtain comprehensive insurance, you must enter into an agreement with the selected agency.

The borrower must comply with the following conditions:

• informing insurance specialists about circumstances that are significant for the occurrence of an adverse event;
• answer all the agent’s questions in detail to conduct an in-depth risk analysis;
• provide data on previous real estate transactions to check legal purity;
• submit an application for insurance in the prescribed form.

Changes made to the contract are valid if they do not contradict the law.

You can familiarize yourself with the rules of comprehensive insurance of one of the Russian insurance companies from the following document:

To obtain comprehensive insurance, the borrower must submit the following documents:

• Russian Federation passport;
• a photocopy of the agreement concluded with the bank;
• copy and attachments;
• information about solvency;
• balance sheets for the last reporting date (for legal entities);
• certificate of ownership;
• confirmation of registration in the unified state register of rights to real estate (if any);
• other acts related to risk.

Accredited companies of some financial institutions are presented in the table.

Bank of Moscow	DeltaCredit	Raiffeisenbank
"VSK"	"BIN insurance"	"Rosgosstrakh"
"AlfaStrakhovanie"	"VSK"	"Zurich"
"Alliance" (formerly "ROSNO")	"Ingosstrakh"	"Renaissance Insurance Group"
IJSC "RESO-Garantiya"	"VSK"	"Transneft"
"SO "Surgutneftegaz"	"Ingosstrakh"	"Surgutneftegaz"
"ERGO Rus"	"SOGAZ"	"ERGO Rus"
"BET"	Uralsib Insurance Group	"Liberty Insurance"
"VTB Insurance"	"Mascot"	"Alliance"
"Insurance Company "Soglasie"	"Invest-Alliance"	"RESO-Garantiya"
"MSK"	"Insurance company "Help"	"Uralsib"

In what cases does the contract expire?

The insurance expires at 24 hours local time on the day specified in the contract.

There are certain circumstances under which it will not be provided to the borrower:

• failure to pay fees when due;
• liquidation of a legal entity that is the insured (by court decision);
• the existence of the risk ceased for reasons not specified in the contract;
• in case of violation of the terms of the agreement;
• liquidation of the insurer in the manner prescribed by law;
• at the request of the policyholder (payment of contributions is provided).

Insurance cost

The cost of comprehensive insurance is determined depending on the following factors:

• age and health status of the borrower;
• insurance period;
• number of previous real estate transactions;
• condition of the property;
• loan size.

The price of the service in question is determined individually for each case and varies from 0.5 to 1.5% of the loan amount.

It includes the cost of insurance:

• title - 0.2% per annum;
• property – 0.3%;
• – 0,5 %.

The final rate is determined by the individual company's terms and conditions. If the borrower takes out several policies for individual cases, there are more expenses.

The cost of comprehensive mortgage insurance in some Russian banks is presented in the table.

What difficulties are possible when forming an agreement?

Each program is governed by special principles that define a clear list of insurance objects, and other factors become exceptions.

When applying for a mortgage, the client is required to enter into an insurance agreement. The borrower should be aware that not all types of insurance are required with a mortgage. In this article we will look at what types of mortgage insurance you can refuse, what risks are insured with a mortgage and how much the insurance policy costs. Let's look at the TOP 9 well-known companies where you can insure your mortgage, and 6 proven ways to save on insurance.

A mortgage loan is issued for a long term, and therefore poses a special risk for the lender. One of the options for minimizing risks is insurance. This gives the bank additional confidence that the client will pay him even in the event of temporary disability or complete loss of real estate.

Expert opinion

Certain types of insurance are mandatory when concluding a mortgage agreement. Thus, on the basis of Federal Law No. 102-FZ of July 16, 1998 “On Mortgages,” real estate pledged as collateral to a credit organization is subject to compulsory insurance. Therefore, when receiving a mortgage loan, the borrower is obliged to insure the structural elements of the purchased housing.

In real life, banks are forced to purchase other types of policies. They explain to their clients that if they refuse voluntary insurance, they will increase the interest rate on the loan or simply not issue it. Thus, in the absence of a life and health insurance policy, most lenders raise rates by 1-2%.

Mortgage Insurance Calculator

The borrower can pre-calculate the cost of the insurance contract using a special online calculator. It can be found on company websites (for example, a calculator from Ingosstrakh) or on our website.

You must enter in the form:

• city;
• bank;
• insurance type;
• object data;
• loan balance;
• information about the borrower;
• start date of the contract.

Using the calculator, you can calculate the cost of insurance for an apartment, life and health, and title. Calculators are available on the websites of most insurance companies. By entering the same data, each calculator produces a result based on the conditions of a particular insurer. The client can compare them and choose which is cheaper.

We suggest using our calculator to preliminary calculate the cost of mortgage insurance.

3 types of mortgage insurance

For a mortgage, there are 3 types of insurance: real estate, title, life and health. The collateral is subject to compulsory insurance in accordance with the law. Other types are voluntary.

Real estate insurance

The purchase of a real estate insurance policy is required not only by Federal Law No. 102-FZ, but also by the Civil Code of the Russian Federation. When a mortgage agreement is signed, the purchased property is pledged to the bank. Before this, it must be insured against partial or complete destruction or damage.

Only structural elements - walls, ceilings, roof, foundation - are necessarily insured. Engineering systems inside the home, furniture, repairs will not be insured. If an insured event occurs, the damage is compensated not by the borrower, but by the insurer.

Insurance situations include:

• fire, lightning strike;
• flooding;
• natural disasters;
• gas explosion;
• hooliganism, vandalism by third parties.

The policyholder must immediately notify the insurer of the occurrence of an insured event. For each incident, an inspection is carried out to determine the cause and assess the damage. If the insurer proves that the cause of the incident was the intentional actions of the borrower or other interested parties, the client will compensate the bank for losses.

Legal advice:

A lawyer on mortgage insurance issues provides advice on our website. The specialist examines each case individually. Just leave your question in the form on the right, or request a call, and a lawyer will call you shortly!

Borrower's life and health insurance

Life and health with a mortgage are insured voluntarily. However, banks literally impose this insurance when applying for a mortgage, and in its absence, they raise the interest rate by 1-4%.

Insured events in such a situation will be:

1. Disability of 1 or 2 groups.
2. The death of the borrower.

Most banks require that the insurance contract include the risk of disability or death as a result of:

• Diseases - heart attack, stroke, pneumonia, cancer, etc.
• Accident - road accident, lightning strike, plane crash, fire, animal attack, etc.

If the borrower dies, the insurance company will pay off the balance of the loan or part of it. However, the insurance will not pay if death or disability occurs as a result of suicide or intentional injury to health. They also will not pay for injuries sustained while intoxicated or under the influence of other substances.

Be careful! Some insurance companies set low prices for insurance policies to attract customers. At the same time, only accident insurance is left in the text of the contract, and illnesses are excluded. The name of the contract remains the same so that the client does not understand it. In the event of disability or death as a result of illness, the borrower or his co-borrowers will pay the mortgage themselves, if the client was insured only against accidents.

Title Insurance

Title insurance protects the borrower's ownership of the property and is not mandatory. In some cases, a bank lawyer may insist on taking out this insurance when he sees additional risks when studying real estate documents. Statistics show that 2% of real estate purchase and sale contracts can be challenged in court.

The reasons for this may be the following:

• Infringement of children's rights when selling property.
• Incapacity of the seller to complete a transaction as a result of alcohol or drug addiction or mental disorder.
• Fraud.

The bank will recommend insuring the title if the package of documents does not include an extended extract from the house register, or the owner of the apartment being purchased is a minor.

The borrower bought an apartment on the secondary market with a mortgage. After 1.5 years, it turns out that the seller’s daughter, who did not know about the sale, has the right to the property. The girl is demanding through court that the apartment be returned to her. When taking out a mortgage, the borrower, at the lender's suggestion, took out title insurance. All losses associated with this proceeding and its consequences will be covered by the insurer.

Such risks arise only when purchasing secondary real estate. Typically the bank requires title insurance for the first 3 years. If you purchase an apartment in a new building from a developer, the lender will not offer this type of insurance.

6 factors that affect the cost of insurance

Many factors influence the insurance rate. For different borrowers, the cost of insurance can vary by 5-10 times. The price reflects the type of insurance, age, gender, health status of the borrower, bad habits, and profession. Let's take a closer look at these factors.

Gender and age

For young clients the tariff will be lower than for older people. This is associated with health status and the likelihood of a longer life. Purchasing insurance is cheaper for women than for men. However, in this case the difference is not as great as when taking into account the age factor.

Health status

For a life insurance contract, this is the most important factor. Even healthy people can be charged a high tariff. Therefore, before applying for a policy, it is better for the client to undergo a full medical examination and prove the absence of predisposition and heredity to serious diseases.

Expert opinion

Alexander Nikolaevich Grigoriev

Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.

If, when applying for insurance, the client concealed the presence of a serious illness, the policyholder will refuse to pay when an insured event occurs.

Also, when filling out the questionnaire, the client fills in information about the presence of bad habits. All questions must be answered honestly; further service and the likelihood of payment in the event of an insurance situation depend on this.

Excess weight

This factor is directly related to the previous one. People with large weights have a high predisposition to a number of diseases. Therefore, the risk that an insured event may occur is higher. Therefore, one cannot count on low tariffs in this case.

Profession

Insurance companies pay attention to the profession of a potential client. Some work in an office, while others work as a high-altitude installer or test pilot. The last two activities involve great risk. This means there is an increased risk of accident or death. The higher the risk to life and health in the client’s field of activity, the higher the insurance rate will be.

Alexey works as a fireman, and Maria works in an office as an accountant. They purchased life and health insurance from the same company. Maria paid 30% less than Alexey. The differences in cost are associated with the greatest risk to life and health in Alexey's case.

Housing type

The price of an apartment insurance policy depends on the year of construction, fire danger, and construction material. The condition of secondary housing and new buildings is radically different. The risk of destruction or damage to secondary real estate is higher. This entails an increased tariff when concluding a contract. Some types of housing cannot be insured at all. Thus, insurance companies practically no longer accept insurance for older apartments.

Amount of credit

The amount of insurance directly depends on the loan amount, since the calculation takes a percentage of the total amount owed. The larger the mortgage amount, the higher the insurance premiums. However, as the loan is paid off, the insurance company applies an increasingly lower rate as the total amount owed decreases.

The above points will be more clearly and clearly demonstrated by the table below:

Factor	How does it affect the cost of insurance?
Floor	For women the price is lower
Age	Young people pay less
Health status	For healthy people without bad habits, minimum tariffs apply
Excess weight	Overweight people pay more
Profession	A profession with an increased risk to health and life is the reason for raising tariffs
Housing type	It is cheaper to insure an apartment than a house. The older the house, the more expensive the policy. The better the condition of the home, the cheaper the insurance
Loan size	The larger the loan, the more expensive the insurance

TOP 9 companies that insure mortgages

Insurance conditions are different everywhere. Below are 9 major insurance companies where you can insure yourself when getting a mortgage.

Ingosstrakh

The company offers clients the choice of concluding separate contracts for several types of insurance or one comprehensive one. Ingosstrakh does not have strict tariffs. The calculation is made on an individual basis. If the contract is terminated early, the remainder of the insurance premium will not be returned.

You can apply for insurance online on the official Ingosstrakh website. The insurance company provides a 15% discount when purchasing a policy online. The policy itself will be sent by email. All you need to do is print out the policy, sign it, and provide it to the lender.

If the company is contacted by a client who, during the term of the mortgage agreement, decides to change his company to Ingosstrakh, he will be given a discount ranging from 5% to 15%. If the loan amount does not exceed 3 million rubles, then the decision on the amount of the bonus is made by the regional office. Otherwise, you will have to wait for a response from the central office.

Rosgosstrakh

Property here is insured at a rate of 0.2%. Life and health insurance for Sberbank will cost on average 0.3% of the debt amount for women, and 0.6% for men. For other credit institutions, rates are set at 0.17%, 0.28% and 0.56%, respectively. In agreement with the head office, a discount may be provided.

As the debt is paid off, insurance premiums will decrease. The contract can be terminated before the due date only if the loan is repaid early. Otherwise, you can only claim 35% of the unused amount.

RESO-Garantiya

This insurer sets different rates depending on the bank where the client receives credit. Sberbank has tariffs on average of 0.18% for property insurance and 0.26% for life and health. For other banks, it is possible to conclude an agreement with tariffs of 0.1% in the case of real estate insurance.

If you change companies, the unused balance of the premium will be returned minus the costs incurred to maintain the policy. The company periodically holds promotions where a discount is provided when concluding a mortgage insurance contract in the first year.

Alfa Insurance

This company offers title and contents insurance at a rate of 0.15%. It is possible to obtain comprehensive insurance. You can change the organization to another, Alfa-Insurance will return the balance of the unused premium.

VTB Insurance

VTB company offers comprehensive insurance when concluding a mortgage agreement. The tariff for comprehensive insurance is 1% of the outstanding balance. If the borrower decides to change companies, then he should not count on getting the rest of the premium back. When paying for insurance services several years in advance, the company will provide a discount.

Sberbank insurance

The maximum value of insured property in Sberbank is 15 million rubles. The tariff is set at 0.25% of the debt amount.

The average health and life insurance rate is 1%. When a customer cancels this policy, the mortgage rate increases by 1%. If the borrower takes out a life insurance policy, the rate remains the base rate. The list of insurance cases at Sberbank Insurance is very large. From it you can select individual risks and insure only them.

It is difficult to switch from Sberbank to another insurance company. By law, this can be done, but the contract will be drawn up in such a way that the balance of the insurance premium will not be returned to the borrower.

VSK

VSK offers to insure your apartment, life and health. The first type of insurance will cost 0.43%, the second – 0.55%. In the case of life insurance and for loan amounts above 4 million rubles, a medical declaration will be required.

The VSK company is loyal to those who decide to change insurers during the loan term. The premium is refunded based on the actual time of use of the policy.

Alliance (ROSNO)

Property insurance at Alliance Insurance Company costs 0.16% of the cost of housing. A health and life insurance policy will cost 0.66%. The company is not accredited by Sberbank, therefore it does not accept bank clients for service. The company has reduced the number of offices, so services may not be available in some regions.

SOGAZ

Structural insurance in SOGAZ will cost 0.1%, life and health – 0.17%. You can also take out a loan insurance policy. In this case, a tariff equal to 1.17% of the outstanding balance applies. You can terminate the contract ahead of schedule only if you repay the mortgage early. In this case, the client will receive back the unused balance of the premium.

Where is mortgage insurance cheaper?

In the table below we have summarized all insurance companies with tariffs and data from the reputable rating agency Expert RA. Companies are arranged in order from more profitable to less profitable.

The cheapest way to insure a mortgage is with the SOGAZ company, which, in addition to inexpensive tariffs, has the maximum level of creditworthiness and financial reliability. RESO is in 2nd place, Ingosstrakh is in 3rd place. The last place went to VSK with expensive tariffs and a moderately high level of financial reliability and creditworthiness.

Insurance Company	Property	Life and health	Title	Rating of the agency "Expert RA"
SOGAZ	0.10%	0.17%	0.08%
RESO Guarantee	0.10%	0.26%	0.25%	ruAA+ (high reliability, creditworthiness and financial stability)
Ingosstrakh	0.14%	0.23%	0.20%	ruAA (high credit capacity, financial reliability and stability)
Alpha Insurance	0.15%	0.38%	0.15%	Not in the ranking
Alliance (ROSNO)	0.16%	0.66%	0.18%	ruAAA (maximum level of creditworthiness, financial reliability and stability)
Rosgosstrakh	0.17%	0.28%	0.15%	ruA (moderately high level of reliability and financial stability)
Sberbank Insurance	0.25%	1%	-	ruAAA (maximum level of creditworthiness, financial reliability and stability)
VTB Insurance	0.33%	0.33%	0.33%	Not in the ranking
VSK	0.43%	0.55%	-	ruA+ (moderately high level of reliability and financial stability)

Obtaining a policy in 5 steps

The bank cannot force the borrower to insure the mortgage with a strictly defined company. Every mortgage bank has a list of accredited insurers it works with. The client has the right to compare prices and choose the most profitable company from this list.

Step 1. Choose an insurance company

First of all, you need to choose an insurance company. However, the choice should be made from a list of companies accredited by the bank. On the one hand, this narrows the client's choice. On the other hand, if an insurance organization has received accreditation from a bank, then you can be confident in its reliability.

Expert opinion

Alexander Nikolaevich Grigoriev

Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.

The accreditation procedure involves a thorough check of the insurer by the credit institution. Only a company that has a positive reputation and experience in the market, satisfactory financial condition and solvency can become accredited.

What criteria are used to select insurers?

1. Duration of work in the insurance market.
2. Tariff size.
3. The company's rating according to independent experts (Expert RA Agency).
4. Promotions and special offers.

The bank provides the client with a list of insurers with whom it is possible to conclude an agreement. The borrower will analyze proposals for certain areas of their activity and select the organization that offers the most favorable conditions.

Step 2. Decide on the type of insurance

If it is mandatory to insure property, then the borrower makes a decision regarding life and health insurance independently. Therefore, you should pay attention to the conditions for issuing two policies at once.

The company may offer a discount when concluding 2 contracts. However, the client has the right to take out one mortgage insurance with one company, and a second one with another. This is not forbidden. The main thing is that both companies are accredited.

Some insurers offer comprehensive insurance contracts. In this case, by concluding only one contract, the client insures several risks at once. If not only property, but also life is insured, most lenders reduce the mortgage interest rate by 1-2%.

Step 3. Collecting a package of documents

Different insurance companies may require different packages of documents depending on the client’s situation and type of insurance.

The minimum package of documents is as follows:

• Russian passport of the borrower;
• application for concluding an insurance contract;
• residential purchase and sale agreement;
• documents confirming the ownership of the purchased property.

For life and health insurance, medical certificates will be required certifying the condition of the borrower at the time of insurance. Sometimes the insurance company requests a report on the valuation of real estate, an extract from the house register, or a certificate from the BTI.

Step 4. We provide documents for verification

When the complete package of documents has been collected, it must be submitted to the insurance company for verification. Depending on the results of the inspection, a decision will be made to conclude an insurance agreement or to refuse insurance. The documents also affect the tariff that will be applied to the client.

Step 5. Pay for insurance and receive a policy

If the insurer has approved the documents, the client signs the insurance contract, pays the cost of the policy and receives it in his hands. Before putting your signature, we recommend that you carefully read the contract to clarify any unclear or controversial points.

Expert opinion

Alexander Nikolaevich Grigoriev

Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.

This document specifies the conditions on which the insurer will rely upon the occurrence of an insured event. Therefore, the client is required to fully understand what he is agreeing to. This determines under what circumstances the insurance will be paid to the client and under what not. If necessary, show the contract to a lawyer who will explain in detail the consequences of all the rights and obligations of the parties specified in it.

6 Ways to Save on Mortgage Insurance

The amount under the insurance contract can be reduced legally. This should definitely be used if the borrower decides that he needs a voluntary insurance policy.

1. Avoid additional insurance

Only property insurance is mandatory. Insurance of other risks remains at the borrower's choice. The bank does not have the right to refuse to issue a loan if the borrower does not insure life and health. However, the interest rate on the loan may increase.

It is worth refusing health and life insurance only if the lender does not raise the interest rate in the absence of it. In other cases, it is more profitable to insure yourself and get a lower loan rate.

You can create an individual insurance program based on your own preferences. The borrower may not insure risks that are unlikely and not relevant in his case, and save on insurance.

2. Do not agree to insurance from the bank itself.

Bank loan managers make every effort to ensure that the borrower insures the mortgage with the bank's insurance company. Services are aggressively imposed, even to the point of threatening to refuse to issue a mortgage. At the same time, sometimes clients do not realize that they can find a better offer.

Expert opinion

Alexander Nikolaevich Grigoriev

Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.

We are talking about collective life and health insurance programs for borrowers. The client is offered to simply sign an agreement and join the program. The cost of insurance is 2-3 times higher. Therefore, we advise you to find out the conditions of other insurers and not agree to insurance from a bank. In the table above, we have already presented the conditions of well-known insurance companies.

3. Make the woman the primary borrower

If a family takes out a mortgage, then the main borrower should be a woman. The insurance rate for women is calculated at a lower rate than for men. Sometimes the difference is up to 2 times.

4. Participate in promotions

Insurance companies regularly hold special promotions to attract new customers. If you track offers on insurers' websites, you can find great deals and save from 5 to 25%.

5. Buy an apartment in a new building

The title is insured only when purchasing a secondary property. No one except the buyer can apply for an apartment in a new building. Therefore, title insurance is not required to be included in the program.

6. Discounts for regular customers

If you have an MTPL or CASCO insurance policy, you can contact this company for services. When applying for mortgage insurance, use this argument - many companies have the practice of providing discounts to regular customers.

Is it possible to refuse insurance?

It is not possible to completely refuse insurance services. At least one contract will have to be concluded - property insurance is mandatory. The lender may insist on title insurance if it sees reasons for this. The borrower may or may not take out a life and health insurance policy voluntarily.

An insurance company can only be selected from among firms accredited by a specific bank.

You should not agree to the insurance offered by the bank until you know the conditions of other accredited companies.

The insurance rate depends on gender, age, health status, profession and other factors.

You can not indicate all risks, but select the most important ones for the borrower.

Before purchasing a policy, you should familiarize yourself with the terms and conditions of potential insurers in order to choose the most favorable conditions.

Read the insurance contract carefully, clarify any controversial issues, and have a lawyer read the contract before signing it.

According to Rosstat, more than 60% of Russian citizens purchase apartments on credit. When concluding a mortgage agreement, most banks insist that the borrower take out a comprehensive insurance policy. If the citizen refuses, the interest rate on the loan increases by 3-5%.

What is comprehensive credit insurance

The use of residential real estate is accompanied by various risks. Comprehensive mortgage insurance protects a citizen from sudden job loss or damage to an apartment or house during operation.

If an insured event occurs, the borrower will receive money to pay the loan, commensurate with the damage received

.

The comprehensive policy includes the following types of insurance:

• object of lending (construct);
• title;
• life and health of the borrower;
• liability of an individual for non-repayment of debt.

Advantages and disadvantages

Comprehensive mortgage insurance is positioned by lenders as a required part of any real estate transaction. From an economic point of view, this procedure is more beneficial for banks, because they will be able to receive funds issued for temporary use upon the occurrence of an insured event. Characteristics of comprehensive insurance that are important for the borrower:

Reduced mortgage interest rate. Minimum down payment amount. Loyal attitude of the bank towards the client when applying for a mortgage. Annual reduction in payments under the insurance policy. Guaranteed financial compensation for a mortgage in the event of an insured event.	High cost of insurance policy. The need to undergo a medical examination. The money remains with the insurer if the insured event does not occur before the mortgage is fully repaid. When an insured event occurs, the citizen is required to prove that he did not hide any chronic disease during a medical examination.

What risks are insured?

The policy covers certain situations. Mortgage insurance does not cover risks associated with war, nuclear explosions and radioactive radiation. When purchasing a second home, you should definitely have structural and title insurance, but some lenders require that the policy include windows, plumbing and other home furnishings. Such requirements greatly increase the price of the contract. With comprehensive insurance, the following types of risks are subject to compensation:

Type of insurance with comprehensive insurance	Types of risks
Insurance of the loan object	household gas explosion; fire; lightning strike; disaster; gas or steam boiler explosion; leakage due to a water supply system failure; subsidence and subsidence of soil; falling of flying objects or their fragments; collision with vehicles; groundwater outlet.
Borrower's life and health insurance	temporary disability; disability; death due to an accident.
Title defense	loss of property rights of the insured; making a court decision to restrict property rights; interference by third parties.
Protection of the borrower's liability for non-repayment of debt	additional costs due to default; lack of funds to repay the debt after the sale of the pledged property.

Compensation amount

The citizen applying for the policy must find out in advance from the institution about the procedure for issuing money in the event of an insured event. The amount of mortgage compensation for a specific type of risk is specified in the contract.

The bank will receive the maximum monetary compensation (100% of the remaining debt) after the death of the borrower due to an accident, while the rights to the property will be transferred to the heirs of the policyholder

.

The amount to be reimbursed is calculated in 2 ways:

1. According to the “first risk” system. The actual damage is assessed by the insurer's employees and compared with the insured amount. If liability exceeds the amount of losses taking into account depreciation of the object, insurance is paid in full. Otherwise, the amount of payments will be equal to the cost of the damage.
2. According to the “proportional responsibility” system. Using this calculation method, a proportion coefficient is calculated and then the amount of damage is multiplied by it. For example, the amount of losses is 400,000 rubles, and the insured amount for a mortgage is 2.6 million rubles. The actual cost of the object is 3.5 million rubles. The proportion coefficient is calculated as follows: 2.6 million rubles. divided by 3.5 million rubles. Its value is 0.75. The final payment amount will be 400,000 * 0.75 = 300,000 rubles.

Terms of comprehensive mortgage insurance

The citizen must follow the terms of the signed agreement in order to receive monetary compensation. This is one of the main conditions for concluding contracts with any insurers. You can insure several risks with agencies that are partners of the lender. The manager should issue a list of them. You can also find the names of agencies on the website of the selected bank. Comprehensive mortgage insurance is carried out on the following conditions:

• the borrower informs specialists about the circumstances that significantly influence the occurrence of an adverse event;
• before issuing a policy, the citizen provides information about all transactions with the selected real estate;
• the individual answers the insurance agent’s questions in detail to assess the risk;
• Changes to an already concluded insurance contract can be made if they do not contradict current legislation.

Policy registration procedure

Regardless of which company the mortgage is taken from, the comprehensive insurance procedure will be as follows:

1. Preparation of documents required to obtain a policy. Almost all insurers require that a citizen undergo a full medical examination, which takes a lot of time. Before visiting the company, the borrower must obtain a mortgage loan agreement. Based on this, the cost of the policy will be calculated.
2. Visit the insurance company with a package of documents and fill out an application. Before signing, you must carefully read all the clauses of the contract, familiarize yourself with the procedure for calculating and providing compensation.
3. Payment and receipt of the finished policy.

To enter into an agreement, a citizen must submit the following documents:

• a copy of your passport and the passports of the guarantors;
• statement;
• certificate of state registration of property rights;
• agreement on obtaining a mortgage;
• certificate from the BTI;
• floor plan of the building;
• an extract from the house register;
• a copy of the property sellers (if the transaction is concluded with individuals and not the developer);
• appraisal report indicating the market value of housing;
• contracts related to the acquired object.

Cost of comprehensive mortgage insurance

The average tariff is 1-1.5% of the loan amount. The price of mortgage insurance includes title (0.2% per annum), property insurance (0.3%), life and health (0.5%). The following factors influence the tariff:

• age and health status of the borrower;
• number of real estate transactions;
• condition of the property;
• mortgage amount;
• insurance period.

The final cost of insurance is determined by the rules of a particular company. If the borrower decides to take out multiple policies, the total costs will be higher. The policyholder has the right to change the terms of the agreement after signing the contract, but this will also be accompanied by additional expenses. The cost of comprehensive insurance in some Russian banks:

Name of the bank	Cost of insurance based on loan amount	Insurance companies
Sberbank		SOGAZ. Alpha insurance. Ingosstrakh.
		Zetta Insurance. Adonis. Ergo.
		Zetta Insurance. SOGAZ. RSHB-Insurance. Liberty Insurance. Alliance.
Raiffeisenbank		Rosgosstrakh. RESO-Garantiya. Alliance. Zurich. MAX.
Alfa Bank		RESO-Garantiya. Rosgosstrakh. Agreement. Progress-Garant. Renaissance Insurance Group.

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First of all, we note that according to the law, anylife insurance carried out solely with the voluntary desire of the borrower himself. No one has the right to force you to make a policy. On the other hand, it is in the interests of both the bank and the client to draw up an agreement to reduce financial risks.

Many people are interested in what . Follow the link to find examples of calculations. Briefly, for most clients under the age of 50, it is still more profitable to insure, the rates are significantly lower compared to the increase in the rate. This allows you to save on the amount of the monthly payment, and, what is much more important, to receive payments in the event of death/disability of group 1 or 2.

Please note that . This is a requirement of the Mortgage Law.

Second important point. Buying a policy is allowed only from an accredited company. Each bank is required to publish a list of selected insurers on its official website. For example, in the list of Sberbank (as of May 2019) there are 15 of them, VTB - 20, Absolutbank - 9, Transcapital - only 5. It is clear that the fewer admitted, the lower the chance of finding a profitable option. This creates opportunities for abuse and manipulation. The bank only allows those who offer a large commission for selling policies.

If you think that such lists limit rights and violate the law, then we will disappoint you. This practice has been absolutely legal since 2009, when the Government of the Russian Federation and the Antimonopoly Service issued a special Resolution. It details the procedure for admitting borrowers to risk insurance. More details in the article " ".

Banks, when providing a loan to purchase real estate, not only issue a mortgage on it, but also require mortgage insurance. Purchasing a property insurance policy is a requirement of any mortgage agreement. What about other types of insurance?

General understanding of what mortgage insurance is

Mortgage insurance is a set of types of insurance that are designed to protect the financial interests of each participant in residential mortgage lending.

The need to conclude such agreements is due to the need:

• bank - in obtaining loan repayment guarantees, which allows reducing the interest rate and increasing the loan term relative to consumer loans;
• the client - in obtaining financial security for the ability to fulfill their obligations in the event of death, disability, decrease in income, and other things.

The main purpose of mortgage insurance is to redistribute risks between insurers, borrowers and lenders in order to increase the reliability of the mortgage insurance system.

Types of mortgage insurance:

• insurance of property under a mortgage, which according to the agreement was pledged, against the risks of loss or damage;
• personal, which is life and disability insurance of the client (borrower or co-borrower);
• title is insurance against loss of title to collateral as a result of termination of ownership.

As an additional option, insurers offer to insure the civil liability of the premises owner against:

• by third parties during the operation of the property (for example, from cases of flooding of a neighbor’s apartment);
• by the creditor for failure to fulfill accepted financial obligations (if there is a delay, if it is impossible to make payments in the future).

Features of this type of insurance

Mortgage risk insurance differs in that the beneficiary under the contract is the lender (bank). In the event of an insured event, the insurer will make an insurance payment in his favor. Its size cannot exceed both the amount of the outstanding debt and the amount of damage incurred.

There is a scheme for paying the insured amount in a lump sum - immediately - upon concluding an agreement for the entire loan term. A more common scheme is the annual payment of the insurance amount.

Do I need to insure my apartment every year if I have a mortgage? Yes. This is specified in the loan agreement.

Legality of requirements for concluding insurance contracts

Real estate insurance for a mortgage: mandatory or not – debates have been going on for a long time, but there is a law and there is judicial practice.

According to Federal Law No. 102-FZ “On Mortgages,” mortgage borrowers are required to insure the collateral. The document does not say anything about other types of insurance.

Personal insurance for mortgage Art. 935 of the Civil Code of the Russian Federation is defined as voluntary. However, banks strongly recommend that their clients take out such insurance. It is optional, but its absence will lead to an increase in the loan rate by at least 1%.

A similar situation has developed with regard to title insurance. The client has the right to refuse, but the loan, since it is riskier from the lender’s point of view, will be offered to him on other, less favorable terms than to those borrowers who agreed to fulfill the bank’s requirements.

Judicial practice in relation to such disputes indicates that in most cases the requirement to conclude a life and health insurance contract is recognized as an abuse of freedom of contract, since they refused to issue a loan without obtaining insurance.

According to the Directives of the Central Bank of the Russian Federation dated November 20, 2015 No. 3854-U, the borrower has the right to refuse the insurance product imposed on him within 5 days from the moment of signing the relevant documents. The amount paid by him must be returned in full.

However, the Central Bank of the Russian Federation explained that if the borrower refuses this service, the lender has the right to change the terms of the standard agreement and increase the interest rate.

This clause is already included in most mortgage agreements. Lenders also widely use their right to terminate the mortgage agreement unilaterally due to the client’s failure to comply with its terms. This provision is also stated in the loan documentation. The bank sends a notice to the client requiring him to either take out insurance, or he will terminate the contract. The latter means that the borrower is obliged to repay the entire loan amount or face legal proceedings.

Citizens' appeals (usually during legal proceedings) to the fact that the requirement for insurance violates their rights are not accepted: the agreement was concluded under certain circumstances, about which the client was warned in advance.

Signing the documents means agreement with the fulfillment of the requirements established by them.

Typical insurance cases

Insurance of a real estate property typically assumes as an insured event:

• fire, including one that occurred outside the insured property;
• household gas explosion;
• disaster;
• flooding that occurred as a result of an accident in the water supply, sewerage or heating system, even if the water came from neighboring premises;
• illegal actions of third parties (hooliganism, robbery, vandalism);
• falling of aircraft (parts thereof) onto real estate;
• identification of structural defects in the structure, which were unknown to the policyholder at the time of concluding the contract.

You need to be prepared for the fact that the minimum package offered by insurers provides for payments only when the insured property has suffered significant damage.

For example, if your neighbors' wallpaper was damaged as a result of a flood, there will be no payment, but if someone breaks a window, you can count on compensation for its cost. The entire loan balance will be paid only when the object is completely destroyed. In the case of a private house, if the foundation remains, then only part of the debt will be repaid, because, from the insurer’s point of view, the rest of the building can still be used to build new housing.

To get more guarantees and more compensation, you should take out more extended insurance, but it will cost more.

The next type of mortgage insurance is life and health insurance of the borrower. Insured events under such a contract are:

• death of the insured due to an accident or illness that occurred during the period of validity of the contract;
• loss of ability to work as a result of illness or accident with the assignment of 1 or 2 disability groups.

What is title insurance for a mortgage is easier to understand from the list of insured events under the following contracts:

• recognition of the sale and purchase as invalid (based on clause 2 of Chapter 9 of the Civil Code of the Russian Federation);
• demand from the buyer of housing (in whole or in part) by persons who retain ownership of the property.

This type of insurance is designed to protect the rights of a bona fide purchaser. Confirmation of the occurrence of an insured event will be a court decision. Payments under such agreements should compensate the borrower’s financial costs and guarantee the lender’s repayment of the loan.

In such cases, the insurance company has the right to provide full legal support, including representation of the client’s interests in court.

The problem of receiving insurance payments

The insurer has the right to refuse to pay insurance compensation in a number of cases. All of them are specified in the insurance contract.

Personal insurance for mortgage lending involves, as an insured event, the identification of the borrower with the 2nd or 1st disability group or his death. In this case, the payment is made in full as a one-time payment. In the first case, the property remains the property of the borrower, in the second it will be included in the inheritance estate and the heirs will receive it without any encumbrance (without collateral or the obligation to repay the loan debt). But for example, compensation under a life insurance contract will be denied if death occurred as a result of suicide or a car accident in which the policyholder was at fault. They will not pay compensation in cases where the client initially knew about health problems, confirmation of which the insurer will find in his medical records, but did not inform about this when concluding the contract.

There will also be problems with compensation for persons who have suffered from professional risks, as well as for those in whose blood at the time of the insured event alcohol or drugs are found that were not prescribed by a doctor. According to the law, the insurer in such a situation is not obliged to repay the debt.

If life and health insurance was taken out in relation to both spouses-co-borrowers, then in the event of the death of one of them, the debt to the bank will be repaid only by half, i.e. by 50% of the loan balance. If the insurance was made taking into account certain proportions, then the payment will be made taking into account how it was stated in the contract. For example, in the event of the death of one of the spouses, compensation may be 70% of the balance, while in the event of the death of the other - 30%.

In cases where there is no firm certainty that the insurance company’s refusal is correct, it is worth contacting a lawyer specializing in this area.

Already at the first consultation, having studied all the documentation, the specialist will be able to confirm or refute the legality of the insurer’s actions and suggest the advisability of protecting their interests in court.

How to save on mortgage insurance

The insurance program offered by the lender's employees is, as a rule, a product that is unprofitable for borrowers. Most banks act as intermediaries between the true policyholder, the organization with which the contract is actually concluded and which will subsequently make insurance payments if necessary, and the client. Accordingly, the lender most likely receives a discount from the “supplier” and at the same time makes an allowance to cover its own costs.

As a result, an insurance contract concluded in a bank office may turn out to be 10-20% more expensive than an agreement drawn up on the same terms either with the insurer itself or with its other official partner.

If you decide to purchase insurance directly from the insurer, check with the lender for a list of accredited companies. Despite the fact that any restrictions when choosing an insurance company are unacceptable by law, they can be established in spite of them. Therefore, it is wiser to check with the bank for a list of accredited insurers.

Considering that the insured amount is calculated based on the loan balance plus interest that will be accrued over the next year, savings are possible due to early repayment of the loan.

The faster the mortgage debt is repaid, the less interest the borrower will pay, the less the insurance amount will be.

You should also consider the loan repayment date. Ideally, you need to determine the deadline for full repayment of the loan by the time the next insurance contract expires. If this does not work out, then you can, by obtaining a corresponding certificate from the creditor about the absence of debt, contact the insurer with a request to return part of the insured amount according to the actual time of existence of the loan obligation (debt to the bank).

How to properly insure yourself with a mortgage so as not to overpay. When determining the sum insured, insurers take into account:

• client's age. The policy will be cheaper for people who are 25-35 years old;
• the price of the property - the more expensive it is, the more the insurer needs to pay;
• with personal insurance, they may be asked to undergo a medical examination, based on the results of which the cost of the policy will be determined. The fewer health problems a person has, the fewer bad habits he has, the greater the discount he will be given;
• The larger the loan amount, the larger the insurance amount will be assigned for payment.

Summary

Mortgage insurance: required or not? An insurance contract for collateral property is required. The rest - formally no; in fact, the bank indirectly (through deterioration of lending conditions or even refusal to conclude a mortgage agreement) forces clients to agree to this requirement.

From a financial point of view, sometimes it is a little more profitable to agree to an increase in the loan rate, but refuse additional insurance.

Interest is accrued regularly on the debt balance, which decreases as payments are received to repay the loan, i.e. monthly or even more often. When determining the insured amount, the amount fixed at the beginning of the year is taken into account.

A reasonable solution to this issue is to comply with the lender’s request, but enter into a mortgage insurance contract directly with the insurance company.

The benefit of the borrower with mortgage insurance is that if an insured event occurs, although the bank will receive the payment, the citizen will be released (partially or completely) from the obligation to pay the mortgage.

In difficult times, which are designated in insurance as insured events (loss of property, disability, etc.), this can come in very handy.

Taking into account the above, we can say that a mortgage is a risky project for the borrower and the insurer. The bank, if it has a full package of insurance and collateral, risks less.