What is mortgage protection insurance?
Debt balance insurance is one of the most important types of insurance when taking out a home loan or mortgage. However, many people do not know exactly what this insurance entails or why banks recommend it. In this article, you will discover what debt balance insurance is, how it works, and why it can be a smart choice when taking out a mortgage loan.
What is debt balance insurance?Debt balance insurance is a life insurance policy that repays all or part of your outstanding debt, usually a mortgage loan, if you die during the term of your loan. This ensures that your partner or family are not left with a heavy financial burden.
The term is mainly used in Belgium. In the Netherlands, it is referred to as life insurance, which serves largely the same purpose.
Why is debt balance insurance important?
When you buy a home, you are entering into a financial commitment that will last for many years. Debt balance insurance provides extra security in this regard. It prevents your surviving relatives from having to bear a large mortgage debt.
Key benefits:
- Financial protection for your partner or family
- Full or partial repayment of the mortgage loan
- Lower interest rates at many banks
- Security and peace of mind throughout the term of the loan
How does debt balance insurance work?
1. You choose the percentage to be insured
- 100% cover – the entire debt is repaid in the event of death
- 50/50 cover – ideal for couples, with each partner insuring half
2. The insured capital decreases in line with the loan
As you repay your loan, the insured amount also decreases. This often makes the premium more affordable.
3. You pay a one-off or annual premium
There are two options:
- One-off premium
- Annual or periodic premium
4. Payment directly to the bank
In the event of death, the insurer pays the agreed amount directly to the lender. This ensures that your family remains financially protected.
Is debt balance insurance compulsory?
Legally speaking, debt balance insurance is not compulsory. In practice, however, banks often require it, especially if you want to obtain a lower interest rate. Sometimes the insurance is even linked to additional benefits within the home package.
When taking out debt balance insurance, you usually fill in a medical questionnaire and sometimes a medical examination is required, on the basis of which the insurer decides whether you will be accepted, what premium you will pay and whether an additional risk surcharge will be applied.
Advantages of debt balance insurance
- Protection for your partner or family
- Mortgage loan is repaid in full or in part
- Possible interest rate advantages at the bank
- Flexible premiums and coverage options
- Peace of mind throughout the term of the loan
Disadvantages and points to consider
- Premiums may increase in the event of health risks
- Not legally required, but often financially advantageous
- Total cost may be higher with spread premium payments
Who might be interested in debt balance insurance?
- Families who want to protect their home
- Couples with a joint mortgage
- Single people who want financial security for their surviving relatives
- Anyone who wants to get the best interest rate from the bank
Would you like to know more about this topic? Contact one of our sales agents!
Frequently asked questions
- How do I choose the right real estate agent in Amsterdam?
Choose a real estate agent in Amsterdam who you feel comfortable with and who has proven knowledge of the local market. Pay attention to things like local experience, approach, communication, reviews and commission. At Koops Makelaardij you get a dedicated real estate agent who personally guides you from the first meeting until the key transfer.
- What is my home worth?
We determine the value of your home based on recent transactions, location, maintenance condition and market trends. During the introductory meeting we make a well-founded estimate. This will give you a realistic picture of what you can expect.
- How do I hand over my house at the key exchange?
The house must be delivered empty, clean and in the agreed condition. Also consider the garden, storage room, appliances and documentation such as manuals or warranty certificates. This ensures a correct and pleasant handover.
- Can expats buy property in Amsterdam?
Yes, expats with a valid residence permit can buy a home in the Netherlands. Some mortgage lenders set additional conditions, such as bringing in equity. We are happy to advise expats on this.
