Skip to content
Calculadora Capital
Mortgage Calculators

Mortgage Life Insurance in Portugal

Work out what the life policy costs across the whole loan, and whether switching insurer wins once the bank withdraws its spread discount.

The premium comes neither from the law nor from any official table: copy it from the bank's offer and from a quote you request elsewhere. The spread increase is the discount you would lose. Leave it at zero if the discount is not tied to the insurance.

Total cost to the end of the loan
€7,530.36
First-year premium
€420.00

What the first-year premium does not tell you

First-year premium, per month€35.00
Total cost as % of outstanding capital5.02 %
If the insured capital did not fall€12,600.00
Difference in favour of decreasing capital€5,069.64

Is switching insurer worth it?

Total cost of the alternative policy€4,303.10
Saving on the insurance€3,227.26
Extra interest from the higher spread€5,988.31
Net result-€2,761.05

Keeping the bank's policy is worth it.

Monthly payment: with discount → without discount€656.93 → €673.57
Highest alternative premium that still pays off€86.01

Premium year by year

YearInsured capitalBank premiumAlternative premium
1€150,000.00€420.00€240.00
6€134,078.44€375.42€214.53
11€115,304.91€322.85€184.49
16€93,168.56€260.87€149.07
21€67,067.01€187.79€107.31
26€36,289.99€101.61€58.06
30€7,744.07€21.68€12.39

Sampled table; the total cost adds up every year of the term.

The premium rate also rises with age, which this calculation does not model: the totals are a floor. The comparison between two offers still holds, because age loads both of them.

Video: how to use the calculator

1

The insured capital is the debt, so the premium falls every year

On a decreasing-capital life policy attached to a Portuguese mortgage, the insured capital tracks what you still owe the bank. Because that balance follows the amortisation schedule, the second year costs less than the first, the third less than the second, and so on. That is why the premium quoted in the offer tells you almost nothing about the total: this calculator rebuilds the amortisation schedule from the capital, the term and the TAN, then adds up each year's premium. On a constant-capital policy the insured amount stays at its initial value and the premium does not fall: the calculator shows both so the difference is visible.

2

You may choose the insurer, and the bank has to accept it

Article 11(1) of Decreto-Lei n.º 74-A/2017 bars the lender from making the loan conditional on compulsory tied sales, "with the exception of those provided for in the following paragraph". Paragraph 2(b) is that exception: the lender may require "one or more suitable insurance contracts related to the credit agreement, in which case the lender must accept the insurance contract of a provider other than its preferred one, if that contract safeguards a level of cover equivalent to the contract proposed by the lender". Equivalence of cover is the only test the bank may apply. Paragraph 5 leaves the requirements of that assessment to a ministerial order, including the maximum period for the bank to decide, the acceptable grounds for refusal, and the possibility of an independent third party reviewing a refusal.

3

The spread discount is the part almost nobody counts

If the bank cut your spread because you took its policy, declining it makes that discount fall away, and that is lawful, provided you are told clearly. Article 11(3) requires the lender, when it offers other products "as a way of reducing the commissions or other costs of the credit agreement, in particular the interest-rate spread", to present "an APRC reflecting that reduction" and to state "clearly and expressly that its actual application is conditional on taking the additional financial products or services". Entering the percentage points you would lose makes the calculator add the extra interest across the whole remaining term and weigh it against the premium saving. On large loans over long terms, tenths of a point on the spread are worth more than the entire insurance policy.

4

Moving the loan does not void the policies you already have

If you transfer the mortgage to another bank, the policies survive. Article 24(2) of the same decree-law provides that early repayment in full for the purpose of transferring the credit "does not affect the validity of the insurance contracts, without prejudice to the replacement of the beneficiary of the insurance contracts by the new lender, on terms that do not affect the risks covered". Paragraph 3 adds that this "prevails over any contractual clause to the contrary, or which in any way worsens the position of the insured or of the consumer as a result of the transfer of the credit". So a clause forcing you to buy a new policy because you changed bank does not hold.

Worked example

A mortgage with €150,000 outstanding, 30 years left and a TAN of 3.3%, with a decreasing-capital policy costing €420 in the first year. As the debt falls, the premium falls with it: €334.07 in year 10 and €21.68 in year 30. The total cost of the insurance to the end is €7,530.36, not the €12,600 you would get by multiplying €420 by 30 years, a difference of €5,069.64. An alternative policy at €240 a year would cost €4,303.10 in total, i.e. €3,227.26 less. But if declining the bank's policy raises your spread by 0.20 percentage points, the monthly payment goes from €656.93 to €673.57 and the extra interest adds up to €5,988.31 over the 30 years. The balance is negative by €2,761.05: although it is 43% cheaper, switching insurer ends up costing more. On those terms, only an alternative premium at or below €86.01 a year would pay off.

Frequently asked questions

Is life insurance compulsory on a Portuguese mortgage?
Not by law. Article 11(1) of Decreto-Lei n.º 74-A/2017 bars the lender from making the loan conditional on compulsory tied sales; article 11(2)(b) opens the exception that lets it require "one or more suitable insurance contracts related to the credit agreement". In practice every Portuguese bank requires life cover, but the obligation comes from the credit agreement, not from a rule imposing it.
Can I buy the policy from another insurer?
Yes, and the bank must accept it. Article 11(2)(b) provides that the lender "must accept the insurance contract of a provider other than its preferred one, if that contract safeguards a level of cover equivalent to the contract proposed by the lender". The bank may assess whether the cover is equivalent; it may not refuse simply because the policy is not its own.
If I decline the bank's policy, can I lose the spread discount?
You can, and it is lawful. Article 11(3) lets the bank offer products to reduce the cost of the credit, "in particular the interest-rate spread", while requiring it to show an APRC reflecting the reduction and to state clearly and expressly that the reduction is conditional on taking those products. Paragraph 4 adds a time limit worth reading in the letter of the law: "Lenders may not require compliance with a condition relating to the taking of other financial products or services, agreed under the preceding paragraph, after one year has elapsed from the decision not to take that reduced rate." The wording is ambiguous as to when that year starts running, and paragraph 5 leaves the detail to a ministerial order, so it is worth confirming your specific position with the bank or with the Banco de Portugal.
Why does the premium fall from one year to the next?
Because on a decreasing-capital policy the insured capital is what you still owe, and that falls with every instalment. The premium follows it. On a constant-capital policy the insured amount stays at its initial value for the whole term and the premium does not fall, which means you are insuring more than the debt as the loan progresses.
Does moving my mortgage to another bank force me to take a new policy?
No. Article 24(2) provides that transferring the credit "does not affect the validity of the insurance contracts", changing only the beneficiary to the new lender, and paragraph 3 establishes that this "prevails over any contractual clause to the contrary, or which in any way worsens the position of the insured or of the consumer as a result of the transfer of the credit".
Does this calculator give me the price of my policy?
No, and none can: the premium depends on age, health and each insurer's tariff, and there is no official table. So the premium is something you enter, taken from the bank's offer or from a quote you request elsewhere. What the calculator does is what those offers do not: project the cost across the whole term and set it against what you lose on the spread. Note too that the premium rate also rises with age, which this calculation does not model; the totals are therefore a floor, but the comparison between two offers still holds, because age loads both of them.

Related calculators & reading

Embed this calculator

Paste this code on your site to show the calculator. It includes an attribution link.

Language
Theme
Colour

Preview

Free to use. The code auto-adjusts its height.

Sources

Author: Thorben Rasmus Idel · Reviewed by: Nahar Geva · Last reviewed: