Are personal insurance and loans necessary?On August 5, 2019 by Anne Close
The closing of the year 2016 has certified a moderate increase in the granting of personal loans in Spain, something that will continue this 2017 and the next years in the heat of the economic recovery. But behind this concession there are also conditions, one of the most repeated life insurance .
In principle we would not see anything strange in linking or relating our loan to life insurance . One of the fundamental points that we must always keep in mind when establishing the capital of our life insurance is to have debts. In addition to providing necessary funds for life insurance so that those we love most can adapt to the new situation (for example, the equivalent income of the deceased person during a period of 3 to 5 years), you must also pay the debts first, between which include mortgage and personal loans.
Why the price is usually higher
The problem is in the hiring of an independent life insurance with the loan, always linked to a company related to the Bank, either of its financial group or company with which it has an agreement, in closed conditions and that as a general rule They have prices above market.
To this we add two points that even make your hiring worse:
- Use the single premium formula: This would pay the entire insurance at the start of the operation. As the amount of this premium is high, it is often included in the principal of the loan, that is, the amount we finance, as a higher amount. With this, we not only pay a significant amount in advance, but we increase the cost of the loan since that amount generates interest.
- Use the interest rate reduction claim if you take out the loan : With this, without obliging us, you are prompted to contract the loan under the promise of improving the loan conditions. The problem is that the savings that are achieved many times is insufficient, so you pay more for this insurance.
Updating your life insurance better than hiring a new one
What should we do? The option is not to have a life insurance but as simple as updating our we have to this new circumstance, to have a debt, a burden that we leave our heirs after our death or disability.
Our life insurance, like the full range offered by Malliser family , is a live product that we must always take into account in our financial planning. If some of the risks decrease, for example, if our children have finished their studies and become independent, we can reduce the amount. In the opposite case, if there are new risks, such as having a debt in the form of a personal loan, expand it.
With this, we will achieve our objective, to have complete protection against a serious eventuality, but we will do it in a controlled and economically efficient way.