When applying for a mortgage loan, one of the conditions of the bank is insurance of mortgaged real estate. Thus, the bank reduces its risks in case of loss or damage to the collateral. This procedure is mandatory by law. But is it necessary to insure real estate with a mortgage every year? Or can we do without it in the coming years?

The procedure and features of drawing up an insurance contract

The object of insurance is collateral real estate. It must be insured during the entire period of the loan agreement.

Usually the bank offers to choose an insurance company from the list of accredited ones. In addition, the bank will most likely be indicated as the beneficiary in the contract, and the insured, in the event of an insured event, will not be able to dispose of the payment at his discretion.

Insurance rates may vary. On average, they amount to 0.25 - 0.5% of the sum insured. Their size depends on several factors:

• List of risks covered by insurance.
• franchise size. The deductible is the part of the damage that the insurance company does not pay. If the amount of damage is less than the amount of the deductible, no compensation will be paid.
• The technical condition of the object of insurance. The size of the tariff is affected by the materials of walls and ceilings, the number of floors, the presence of repairs, etc.
• Features of operation.

The bank usually requires mortgage insurance against four main risk groups:

1. Damage caused by fire.
2. Water damage.
3. Natural disasters.
4. Illegal actions of third parties.

At the request of the borrower, it is possible to insure the interior decoration of the premises, which will lead to an increase in the tariff.

Interaction with the insurance company can take place without contacting its office. In any case, before signing the insurance contract, an employee of the insurance company or its authorized person inspects the future collateral real estate and draws up an act that is signed by both parties.

Can be distinguished the main requirements that the insurance company makes to the object of insurance:

• The property must not be in disrepair or should not be recognized as dilapidated.
• The building is not to be demolished.
• The degree of wear should not exceed 70%.
• All construction work must be completed by the date of execution of the contract.

The sum insured usually starts from the loan amount plus 10%. But, as a rule, banks require to conclude an insurance contract based on the estimated value of real estate.

The insurance contract is concluded for at least one year. In fact, the borrower has to bear additional costs annually to pay the insurance premium. You can apply to the bank with an application for payment of the insurance premium in several parts. But in any case, it is necessary to insure real estate with a mortgage every year.

Payment of compensation

In the event of an insured event, first of all, it is necessary to notify the insurance company and the creditor about this. The amount of the payment depends on the degree of damage to the collateral.

If the property is not subject to restoration, then the payment of insurance compensation will be used to pay off the debt. In the event that the loan amount is less than the amount of insurance payments, the policyholder will receive the difference in his hands. If the damage does not significantly affect the value of the mortgaged property, then the bank decides where the compensation will be sent. Usually, if the borrower repays the debt on time, the bank may allow the payment of insurance compensation to him to restore damage or compensate for losses incurred.

Title risk insurance

Title insurance is insurance against the risk of losing ownership of real estate. This type of insurance is optional. However, there are cases when lawyers of a credit institution put forward requirements for concluding a title insurance contract after analyzing the documents for the purchased property.

The question of this type of insurance arises when there is a risk of recognizing the illegality of the transaction. For example, the rights of a minor were violated, or the sale was made by a person with mental disorders. Also, an increased risk arises if the sale of real estate was carried out by a third party on the basis of a power of attorney.

A title insurance contract is usually concluded for three years.. This corresponds to the statute of limitations on property rights.

When signing an insurance contract, do not spare time and carefully read the entire contract (as a rule, it takes several pages of text written in small print). If there are any unclear points, it will not be superfluous to consult a lawyer. If there are clauses that infringe on the legal rights of the insured, it is necessary to demand amendments to the contract. This will help to avoid a situation where, as a result of an insured event, the borrower may be left homeless and with a loan balance.

Object of insurance

Property interests of the Insured related to the loss or damage to the insured real estate (apartments, houses, cottages, garden houses, land plots).

Insured events:

Loss or damage to real estate as a result of:

• fire;
• explosion;
• flooding;
• natural Disasters;
• theft;
• robbery;
• robbery;
• intentional destruction of property by third parties;
• other circumstances.

Sum insured

The sum insured is determined by one of two options:

• in the amount of the actual value of real estate (the sum insured remains unchanged throughout the entire term of the Insurance Contract);
• in the amount of the balance of the debt on the loan (the sum insured is reduced annually in accordance with the decrease in the balance of debt on the loan).

Deadline for payment of the sum insured

The amount of insurance payment

In the amount of actual costs for the restoration of damaged (lost) property, taking into account wear and tear on replaced parts and materials, but not more than the sum insured.

auto insurance

Object of insurance

• Property interests of the Insured (the Beneficiary) associated with the possession, use, disposal of the vehicle, as well as additional equipment installed on it.
• Property interests of the Policyholder (the Beneficiary) related to the possession, use, disposal of the Vehicle and additional equipment installed on it due to their damage or loss (destruction, loss), including before the Vehicle is registered.

Insured events:

Destruction or damage to the vehicle as a result of:

• fire;
• explosion;
• collision with another vehicle;
• collision (impact) on stationary or moving objects (structures, obstacles, animals);
• overturning;
• falling of any objects, including trees, snow and ice;
• ejection of gravel, stones and other objects from under the wheels of vehicles;
• falling into water;
• failure under the ice;
• natural Disasters;
• illegal actions of third parties;
• theft of the vehicle (loss as a result of theft, robbery, robbery).

Sum insured

Not more than the actual (market) value of the vehicle; not less than the balance of the debt on the loan.

Deadline for payment of the sum insured

Within 5 working days from the date of receipt of all documents necessary for making a decision.

The amount of the insurance premium

In accordance with the tariffs of the insurance company.
Detailed information can be obtained at any office of Sberbank.

The process of obtaining a mortgage loan is not as simple as it seems at first glance, because after the borrower has received a positive decision from the bank, he faces several other tasks, in particular, one of them is the issue of collateral insurance. It should be said right away that it is impossible to refuse this type of protection insofar as it is contrary to the law. In any case, the purchased housing is the subject of collateral, which means that it must be insured at the expense of the borrower. Mortgage property insurance is a procedure that has its own characteristics and nuances, we will consider them in more detail.

Types of insurance for mortgage lending

So, when applying for a mortgage loan, the bank offers its borrowers three types of protection - property protection, title insurance and personal risk insurance. Of all the above types of protection, only one is mandatory - this is insurance of the collateral. Moreover, this requirement is regulated by law, respectively, the borrower does not have the right to refuse it. But it is quite possible to refuse life and health insurance, as well as title insurance.

When insuring the life and health of the borrower, the latter receives a guarantee of payment of a mortgage loan by the insurance company in the event of an insured event. That is, for example, if the borrower loses its solvency due to unforeseen circumstances, then it is possible to impose obligations on the insurance company. True, the list of insured events is strictly limited, which means that such protection still does not give a 100% guarantee. Title insurance is protection against the right to claim for collateral by third parties for 3 years. That is, after the conclusion of the contract of sale, the limitation period is 3 years, during which the transaction can be challenged in court. Title insurance protects financial obligations to the bank in the event of loss of ownership.

By the way, one cannot fail to say that first of all, not only the bank, but also the borrower himself needs insurance of his property, because the prospect of relations with a credit institution is quite long, during this period the borrower must be 100% sure that his property will remain in safe and sound, at least until the moment he pays the bank. What are the benefits of property insurance? If unforeseen force majeure circumstances occur during the period of payment of a mortgage loan with housing, then the balance of the mortgage loan must be reimbursed by the insurance company.

Please note that if unforeseen circumstances occur in housing, then in any case, the borrower will be required to repay the loan to the bank in full.

What risks are insured by the borrower

In fact, the list of services of insurance companies is quite extensive, so there are mandatory insurance risks and insurance risks that the borrower can issue at his own request. To begin with, we will consider what the borrower must insure when applying for a mortgage loan, namely under what circumstances compensation will be paid:

• fire;
• domestic gas explosion;
• attack by intruders and damage to property;
• damage to property due to natural disasters;
• flooding associated with damage to communication systems;
• design defects.

And at will, of course, for a fee, the borrower can take advantage of additional protection. For example, to insure civil liability to neighbors, if he does not intentionally cause damage to the property of neighbors, then he will compensate for the damage not on his own, but at the expense of the insurance company.

Please note that the cost of the insurance premium will directly depend on the set of insurance risks.

How to get insurance

Oddly enough, but the borrower must take out insurance even before the transfer of ownership of the collateral, respectively, first you need to draw up a policy, then only conclude a contract of sale and an agreement with the bank. At the same time, the borrower pays the insurance premium at his own expense, in some cases, of course, banks are ready to finance this event, for example, when the insurance premium is included in the amount of the mortgage loan, but this is most likely an exception to the rule.

Basically, the borrower has the right to choose the insurance company with which he would like to cooperate, however, each bank has a number of accredited companies that they strongly recommend to their borrowers. That is, these are the companies that deserve the trust of a credit institution. By the way, if you ignore the recommendations of the bank and conclude an agreement with a third-party company, then there is a possibility that the insurance agreement in this case will not be taken into account by the bank, therefore, before choosing protection for yourself, it is wiser to consult with a bank specialist.

The second question that interests the borrower is the cost of the insurance premium, in fact, a strict individual question, because the price consists of several indicators:

1. The term of the loan, the longer the period of the mortgage loan, the cheaper the insurance will cost in terms of each month.
2. The technical characteristics of the collateral play an important role, that is, the greater the risk of loss, the more expensive the insurance premium.
3. Insurance companies also double-check the frequency of transfer of ownership, the more often the property was the subject of a transaction, the more expensive the insurance premium will be.

In general, each insurance company has its own tariffs for providing services to mortgage borrowers. In addition, it should be noted that the maximum loan period should not exceed 50 years, the minimum period should not be less than the term of the loan agreement. By the way, there is no need to pay an insurance premium for the entire loan period, because you can renew the contract once a year or once a quarter, and each time the borrower will pay for the service on his own.

List of insurance companies

Of course, each bank has a list of accredited insurance companies whose policies are accepted by the bank as a security for mortgage lending. However, a potential borrower should be aware of what rates he will have to face and how the amount of the insurance premium is calculated. First of all, the amount of the mortgage loan without taking into account the interest rate is taken as the basis for calculating the amount of the insurance premium. For example, if the value of a property is 3 million rubles, while the bank finances only 2.5 million rubles, then insurance should be calculated based on the amount of 2.5 million rubles.

The size of the insurance premium is a strictly individual issue, on average it ranges from 0.3% to 0.6% per year of the mortgage loan amount. For example, if a bank has invested 2.5 million rubles in the purchase of real estate, then the annual insurance premium for the borrower will cost from 7,500 rubles to 15,000 rubles. Moreover, every year the amount of the insurance premium will decrease as the mortgage loan is paid, the insurance premium will next time depend on the balance of the principal debt on the mortgage loan.

Here are examples of companies in which real estate is insured with a Sberbank mortgage and their rates for services:

• Sberbank insurance - 0.25%;
• VSK - 0.43%;
• Reso-guarantee - 0.18%;
• Rosgosstrakh - 0.17%;
• Ingosstrakh - 0.14% per year.

There are only 26 insurance companies on the Sberbank list, so the borrower can directly familiarize himself with all the tariffs and choose the one that offers the most convenient conditions for him. Among other things, insurance companies offer the borrower other types of protection, namely personal risk insurance and title insurance, any type of protection is paid directly by the borrower at his own expense.

How to buy an insurance policy

To acquire protection, the borrower must prepare as much as possible for this process. You should not think that in order to purchase a policy, he will only need a passport and money, in fact, insurance companies take a responsible approach to protecting the property of borrowers in mortgage lending. That is, the borrower must prepare some documents:

• notarized copies of the borrower and his co-borrowers, as well as the seller of the property;
• certificate of ownership of real estate, and title document;
• permission from homeowners to sell it, if it is in shared ownership;
• medical examination of the borrower, if he draws up comprehensive insurance, that is, protection of real estate, personal risks and title;
• extract from the Unified State Register of Rights;
• residential building plan and cadastral passport;
• certificate from the bureau of technical inventory;
• independent expert evaluation.

This is not the whole list of documents that need to be prepared for the insurance company. But at the same time, it should be borne in mind that each individual organization has an internal regulation on the basis of which the insurance company provides its services, so first you need to contact the service provider directly to clarify the current list of documents.

Online insurance premium calculator

Please note that if at the time of the sale of the apartment minor children were registered in it, then it is necessary to provide the insurance company and the bank with permission to sell from the guardianship and guardianship authorities.

The borrower must collect a complete package of documents and contact the insurance company directly in order to conclude a contract. After that, the contracts must be transferred to the lender and this must be done before the transaction and registration of the mortgage loan. By the way, the insurance company cannot refuse to provide the service, but it can significantly increase the rate under certain circumstances. For example, if the technical condition of the property leaves the best, that is, the apartment is located in an old building or there is a threat of force majeure.

What to do if an insured event occurs

The protection of the collateral against unforeseen circumstances is drawn up in order to ensure that the borrower can compensate for the damage in the event of an insured event and is guaranteed to receive a mortgage payment from the insurance company. Therefore, you need to know what to do if, nevertheless, an insured event has occurred. First you need to contact the insurance company to clarify the list of documents that you need to provide to receive compensation.

Further, events can develop according to several schemes. First of all, the expert of the insurance company will study the circumstances of the occurrence of force majeure circumstances, conduct an examination in order to make a decision on the payment of compensation. If the examination showed that the loss of property occurred due to unforeseen circumstances, and not through the fault of the borrower, then the insured pays the bank the full amount of the loan to repay the principal debt or, in other words, makes early repayment of the mortgage loan, the borrower is completely released from obligations to the bank.

But in some cases, insurers refuse to pay compensation to the borrower for property damage. If this happened, then here the borrower has only one option - this is to go to court and challenge the decision of the insured in accordance with the contract concluded with him. In 90% of cases, the court takes the side of the borrower and obliges the insurance company to fulfill its obligations in accordance with the agreement concluded between the parties.

Please note that in any case, the borrower is obliged to fulfill his obligations to the bank until the insured does, that is, mortgage payments remain the obligations of the borrower in accordance with the concluded loan agreement.

So, to summarize, the insurance of the collateral is a mandatory procedure for the borrower, he does not have the right to refuse it and must fully comply with the bank's requirement. Further, he has the right to independently choose an insurance company and conclude an agreement with it. In any case, insurance will be appropriate for both parties to the loan agreement insofar as the borrower receives a guarantee for the entire period of loan repayment against the loss of his property left as collateral with the lender.

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• Questions and answers

Mortgage insurance is a prerequisite for obtaining a mortgage loan. By purchasing a policy, you protect your interests; in the event of an insured event, the client does not bear financial losses. Property insurance will protect you in an unforeseen situation related to damage or loss of property purchased on credit.

A number of insured events have been identified, upon the occurrence of which compensation is due. Mortgage real estate insurance involves cash payments if the acquired property has suffered from the following factors beyond the control of the borrower:

fire, flood;

other natural disaster;

technological disaster;

gas explosion;

illegal actions of third parties;

vehicle collision.

In the event of an insured event, the company servicing the policy compensates for the costs of restoring the property. We work with reliable insurance companies. A wide range of programs is available for clients, due to which the cost of insuring an apartment with a mortgage will be optimal.

Mortgage insurance cost

The exact answer to the question of how much mortgage insurance costs for an apartment or house depends on many factors. Each company sets its own rates, which are influenced by the type of property, its market value and other factors.

DeltaCredit Bank works with a large number of insurance organizations, which allows our clients to choose the optimal and profitable program. Our experts will help you calculate the price of insurance for an apartment or house and guide you through the range of offers for buying a policy.

The price of mortgage real estate insurance is always set on an individual basis. During the entire term of the loan repayment, the borrower is obliged to annually renew the home mortgage insurance.

Mortgage lending is a long-term program, so you can use other insurance products as well. For example, take out title insurance that protects you from various legal risks. See details.

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