Property insurance (annual)

What it is Insurance of the property itself that serves as collateral for the loan — it covers damage from fire, natural disasters, accidents and similar risks. The bank requires it because it protects the asset securing the loan from destruction. It is usually assigned in the bank’s favour (as beneficiary) for the term of the loan. The premium is annual, expressed per mille of the sum insured, and is paid by the client — unless it is listed as a “bonus” in the offer, meaning the annual premium is covered by the bank, not the client. This is common in offers from banks that are part of an insurance group.

Why it matters to you This is a real, recurring cost for the whole term of the loan and is part of the total price (APR). Over a long term, a seemingly small difference in the per-mille rate adds up to a significant amount.

What to watch for

• By law and in most cases you have the right to take out the property insurance with an insurer of your choice, not only within the bank’s package — compare the rates.
• The bank package often gives an interest discount if you use the bank’s insurance, but frequently at a higher premium. Calculate the net effect, not the individual items.
• Always check what amount the premium is calculated on — the market or insured value of the property, or the outstanding loan balance.
• The cover the bank requires is minimal and in practice only protects the asset from destruction. If you want real cover for everyday risks (third-party liability, theft, flooding) or to insure appliances or a collection, add them separately after consulting a Credit Consultant or an insurance broker.

In the LendingFree comparison report property insurance is always included, albeit with a minimal value assumption — it is not conveniently left out on the pretext that its actual value is unknown at an early offer stage. The premium is almost always charged on the property’s market value, which is usually close to the agreed price.