What mortgage insurance includes

Mortgage insurance is a set of several policies a bank asks for when you borrow against a home. It usually covers three things:

  • Property insurance — the mortgaged flat or house against destruction and damage: fire, water leaks, gas explosion, natural disasters, unlawful acts of third parties.
  • Borrower life and health insurance — in case of death or disability. The payout goes to the bank to repay the debt, and the family keeps the home.
  • Title insurance — in case ownership of the home is challenged and terminated by a court, for example because of defects in past transactions. It is most often requested when buying a resale flat.

What the law requires

Only insurance of the mortgaged property is mandatory: this is set by Article 31 of Federal Law No. 102-FZ on mortgage (pledge of real estate). The risks of loss and damage are insured, and the sum insured must as a rule be no less than the loan balance — the exact requirements are set by the bank.

Life, health and title insurance are voluntary. A bank may not refuse a loan because you decline these policies, but it can offer a higher interest rate: this option is written into the loan terms. So before deciding, compare the extra interest at different rates with the cost of the policy.

The borrower may choose the insurer — as long as it meets the bank's requirements. Banks publish their requirements for insurers on their websites.

How to get a refund for the policy

  • 14 days. Under Bank of Russia Directive No. 3854-U, any voluntary insurance contract can be cancelled within 14 calendar days if there have been no insured events.
  • 30 days. If the insurance was taken out to secure a loan, Article 7 of Federal Law No. 353-FZ on consumer credit gives the borrower 30 calendar days to cancel with a premium refund, provided there have been no insured events. The bank may then change the rate if the agreement allows it.
  • Early repayment. If the loan is repaid in full ahead of schedule and the insurance contract secured it, you can recover part of the premium for the unused period.

What drives the price

Rates are applied to the sum insured — usually the loan balance, sometimes with a margin required by the bank. So the policy gets cheaper every year as you repay the loan.

  • Property: type of property (flat, house, serviced apartment), wall material, year of construction, wooden floors, gas supply.
  • Life and health: age, sex, health, occupation and sports. The insurer may ask for a medical questionnaire or examination.
  • Title: the property's history, number of transactions, involvement of minors, inheritance in the chain of owners.

The mortgage insurance calculator helps compare offers for your loan.

How to choose an insurer

  1. Get the bank's list of requirements for insurers and policy terms.
  2. Request quotes from several companies: a policy bought outside the bank is often cheaper.
  3. Compare exclusions: conditions known at the time of purchase, dangerous sports, refusal of a medical check.
  4. Check how the policy is renewed each year and passed to the bank.

Insurer profiles are in the directory of insurers, and Polis Re specialists can help find a policy that meets the bank's requirements — send a request.

How to claim

The beneficiary under a mortgage policy is the bank, up to the amount of the debt; the rest goes to the borrower or their heirs.

  1. Notify the insurer and the bank within the time set in the contract.
  2. Collect documents: for damage to the home — a report from the management company or a certificate from the Emergencies Ministry; for illness — medical records; for death — the death certificate and medical report.
  3. File the claim; the insurer reviews it within the time set by its policy wording.

Step-by-step guidance is in the Insurance claim section.

Common mistakes

  • Missing the renewal. The policy runs for a year; if the new one does not reach the bank on time, the rate may rise under the loan terms.
  • Not declaring illnesses in the questionnaire. Inaccurate health information is grounds to challenge the contract.
  • Buying everything at the bank without comparing prices. The bank must accept a policy from any insurer that meets its requirements.
  • Assuming the mortgage policy covers finishes and belongings. It usually covers only the structure. Renovation, belongings and liability to neighbours need a separate home insurance policy.

Related types: life insurance and accident insurance.