Is life insurance a requirement for a mortgage?
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| Is life insurance a requirement for a mortgage? |
Types of insurance related to mortgage finance
Some may confuse the concepts of the three insurance programs that are obtained when obtaining real estate financing as follows.
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Life insurance or insurance protection
The contract between the insured (the insurance company) and the insured (the beneficiary) in which the parties agree that the insured shall pay a fixed amount of money, salary or other compensation in the event of the insured being exposed to his death or death, To him or to his heirs or beneficiaries whom he has chosen to benefit from. In return for the insured paying the price of the insurance policy or monthly installments to the insurance company for a period specified by the contract. The policy may contain additional benefits, including disability, disability or serious illness treatment costs, or the purpose of the document may be to cover the costs of university education for children or other goals.
The Saudi Arabian Monetary Agency (SAMA) Real Estate Finance Regulations do not require life insurance for real estate financing, so it is not mandatory because it is not tied to the amount of funding. But some banks may include it among the advantages of some mortgage programs.
The primary objective is to provide the necessary financial protection to the beneficiaries of the insurance policy when any harm is caused to the holder of the document.
Property insurance or property insurance
The property insurance policy covers all risks to which the property may be exposed, such as physical damage, damage to property, or damage. The period of coverage of the property extends from the risks over the validity of the document, which may be subject to certain conditions and exceptions. The property insurance policy provides a wider coverage of risks from fire insurance coverage and the risks resulting from it. This document can also be customized and add more benefits and coverings according to customer requirements and needs.
According to the leasing system for real estate, the mortgage lender may insure the risks he faces in accordance with the Cooperative Insurance Companies Control Law, but the cost of insurance on the lessor. Therefore, property insurance may be one of the advantages of the real estate finance program provided by the bank and is done by the rental system.
Loans of Islamic banks in the balance
The primary objective is to protect the property owner or beneficiaries from financial risks resulting from any damage to the property.
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Insurance on housing loan
This type of insurance is done between the financier and the insurance company and is considered to be a kind of credit insurance. Its purpose is to protect banks and finance companies from the risks of defaulting borrowers and not repay them to the outstanding installments until the late payments or the execution of the guarantees for the loan are collected. Factors that affect the cost or value of premiums, including the amount of funding obtained. Banks usually require residential loan insurance as a condition for approval of financing, as part of the risk protection measures and to ensure that the bank will receive the due amount even if the borrower fails.
The primary objective is to protect banks and financiers from the risk of defaults and inability to pay their installments.
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