5 Steps to Transfer Your Mortgage Life Insurance

O Decree-Law No. 222/2009 It has brought about significant changes for policyholders of this type of insurance. For example, Article 4 provides for the possibility of switching plans during the term of the contract. Consequently, consumers can choose a company that offers them better terms, even after the financing has begun.

To transfer a life insurance policy:

Step 1: Check the bank's terms and conditions in the loan agreement

Some contracts may impose a spread penalty if the insurance policy is transferred—which is generally worth it. In other contracts, it is clear that it is not mandatory to purchase the policy from the company affiliated with the bank (and, therefore, there is no spread penalty).

On the other hand, there are contracts that require you to subscribe to a certain number of products with the bank, such as retirement savings plans (PPRs) and credit cards. That’s why you can sign up for one of these products—if you don’t already have it with the bank—to exchange it for life insurance and maintain the same terms.

However, if you switch to the group plan and don't have enough products, you'll incur a penalty—but it's well worth it, depending on your age.

Step 2: Check your policy to see what coverage is included in your current life insurance policy

If you have an Absolute and Permanent Disability, this coverage will only be triggered if the Insured is in a «vegetative state.» As for Total and Permanent Disability, this coverage has a broader scope. That is why it is recommended by DECO—the Portuguese Association for Consumer Protection.

Step 3: Contacting mediators, such as EXS

This tool allows you to compare different plans with your current insurance policy, along with the savings.

Step 4: Notify the Bank of the insurance cancellation

You must send the cancellation request to the bank by certified mail with proof of delivery to the insurer. You must provide 30 days’ notice. This is the most common notice period, but it is advisable to check the General Terms and Conditions for your specific case.

Step 5: Cancel direct debit

You should cancel as soon as possible: that way, you won't have to continue paying the premium for the old policy. The effective date of the new policy will be immediately following the cancellation of the old life insurance policy.