What is an outstanding balance insurance?

What is an outstanding balance insurance?

When you take out a loan with the bank to buy a house, most banks also require you to take out an outstanding balance insurance. This insurance ensures that when the insured person dies, the insurance company will pay (part of) the outstanding loan to the bank. Exactly how much the insurance will pay depends on what was stipulated in the policy.

One of the most common divisions is that each partner insures for half. In the event of death, the remaining partner will then still have to repay half of the loan. 

You also have the choice of insuring the full amount separately. In the event of death, the full remaining amount of the loan will then be paid by the insurance. The advantage of this insurance is that your relatives have more protection in the event of your death and it can also be tax advantageous. 

How big is the premium?

This depends on several factors such as: risk of death, illness, age, duration and amount of the loan

Is it compulsory to take out an outstanding balance insurance?

It is not compulsory by law to take out this type of insurance, but the bank where you take out your loan may impose a contractual obligation to take out an outstanding balance insurance, although in this case you are not obliged to do so with the same bank. Nevertheless, it is strongly recommended to take out such insurance to protect your relatives.