A LUCRATIVE BUSINESS FOR BANKS. LINKING INSURANCES TO LOANS

It is not a legal requisite. Yet it is a common practice for financial institutions to include a condition, obliging the borrower to take out insurance policies, when agreeing to loan you the funds for the purchase of a property. The types of insurances linked to the loan are usually; home, contents, health, invalidity, risk of unemployment and life insurances.

These contractual conditions which are imposed on the borrower, are not only unfair but are beneficial exclusively to the lender. This becomes evident in the case of claiming compensation. The loan institutions have underwritten the clauses in favour of the financier.

This is an abusive practice because it imposes procurement of unsolicited goods and services, therefore unfairly enriching the credit institutions as the insurances they offer are usually more expensive.

To justify these actions the banks use the wording of the ‘Circular 8/1990 of the Bank of Spain’ It can be said that the banks interpret the law as they see fit.

Having a life insurance with the same entity from which the loan was obtained can cause renewal problems for the heirs in case of death of the insured.

The only way these disgraceful practices can be halted is for us the public not to accept them. This is easier said than done, when one is anxious to obtain the mortgage loan.