What about mortgage insurance?

When a property has been financed by a housing loan, its insurance is a contractual obligation of the borrower. In fact, many borrowers consider themselves obliged to insure their mortgaged property with the same bank from which they received the loan.

That's not true.

According to Circular 462 of the Bank of Greece, the borrower has absolute freedom to choose an insurance company, as long as the insurance policy covers the minimum requirements provided for in the loan agreement.

Simply put:

• You can choose any insurance company you want.
• The bank cannot impose a specific insurer on you.
• All that is required is for the contract to meet the loan coverage requirements.

In addition, the mortgage insurance provided by the bank is often limited to the capital of the loan, with the result that in the case of partial lending, there is a risk of sub-insurance, i.e. the insured capital is less than the actual insurable value (or reconstruction value).

Then, in the event of damage, the proportionality rule applies, i.e. the compensation is reduced proportionally. The principle of proportionality is laid down in Law 2496/1997.

For example, if you buy a house worth 120 thousand euros with a loan from the bank, amounting to 60 thousand euros. In the event of an earthquake disaster, the compensation will be directed only to the bank and will cover only the value of the loan. In this case, you will not receive compensation for the amount you have paid.