Mortgage Home Insurance in Spain: What Banks Require (and What You Can Choose)

In practice, lenders commonly require insurance that protects the property used as collateral - often described as fire insurance or buildings/home cover. That doesn't automatically mean you must buy the bank's full home insurance package. What matters is meeting the lender's minimum requirement. Many buyers then choose to add contents and liability because those are the cover sections that tend to matter most in real claims (like leaks affecting neighbours). If you're unsure what your bank requires, ask for the minimum conditions in writing.

Banks may require you to have certain insurance in place, but they are generally obliged to accept an equivalent policy from an insurer you choose, as long as it meets the required conditions. Under Spain's Law 5/2019 on mortgage credit, bundling is regulated. If you're told 'you must take ours,' ask the bank to confirm the minimum insurance requirements and whether external insurance is accepted. Then compare total cost (mortgage pricing + insurance premium) rather than looking only at the insurance price on its own.

The bank usually focuses on protecting the property value (the structure). Full home insurance can include much more: water damage cover, personal liability, contents, theft, and emergency assistance. The biggest problems for owners in Spain often involve leaks and liability disputes - especially in apartment buildings - so many people choose broader cover than the bank's minimum. The best approach is meeting the bank's requirement first, then deciding which risks you want covered for your day-to-day reality.

Start with what the bank requires, then compare the policies on: deductible, water damage wording, liability limits, contents limits, and claims handling. Also check whether the mortgage discount depends on keeping the bank's policy, and compare the full yearly cost. If you switch insurers, make sure the bank receives a clear certificate or summary showing the required cover is in force. If the bank refuses, ask exactly what requirement is not met so you can fix that point rather than guessing.

If you fail to maintain the required insurance, the bank may purchase a policy on your behalf and add the cost to your mortgage payments - often at an inflated price. In some cases, it could be considered a breach of your mortgage contract. To avoid this, ensure continuous coverage and provide the bank with renewal certificates each year. Set calendar reminders a month before renewal to avoid lapses.

Costs typically range from €150 to €500 per year for basic buildings cover required by banks. Full home insurance (buildings + contents + liability) usually costs €250-€700 annually, depending on property size, location, and coverage levels. Coastal and flood-prone areas tend to be more expensive. Bank-linked policies may appear cheaper but often have higher deductibles or limited coverage.

Yes, you can switch insurers at renewal time (typically annually). Give your current insurer written notice at least one month before renewal, then provide the new policy certificate to your bank. Some mortgage contracts tie interest rates to keeping the bank's insurance, so calculate whether switching saves money overall. The bank cannot legally refuse a compliant external policy.

You'll need: property address and postcode, property type (apartment/villa), approximate size in square metres, year of construction, intended use (main residence, second home, or rental), an estimate of rebuilding cost, and details of any security features like alarms or reinforced doors. For contents cover, you'll also need to estimate the value of your belongings.

Community insurance (seguro de comunidad) typically covers common areas and the building structure, but it usually doesn't satisfy the bank's requirement for your individual property. You need a policy in your name covering your specific unit. However, check what the community policy covers to avoid paying for duplicate buildings cover - sometimes you only need contents and liability for your own unit.

Second homes and holiday properties are still eligible for mortgage insurance, but expect slightly higher premiums (typically 10-20% more). Insurers may ask about occupancy patterns and security measures. Some policies have restrictions if the property is empty for extended periods. Declare the usage accurately - claiming it's a main residence when it's not could invalidate your coverage.

Properties built before 1980 or those with historic designations may face additional scrutiny. Insurers often want details about the electrical system, plumbing, roof condition, and any renovations. Premiums can be 15-30% higher for older buildings. Some historic properties require specialized policies. Always declare the build year accurately - underinsurance or misrepresentation can void claims.

For most claims: report to your insurer within 7 days (immediately for theft), document damage with photos and receipts, get repair quotes if needed, and complete the claim form. An assessor may visit for larger claims. Payments typically take 2-6 weeks once approved. Keep all receipts and communications. For liability claims involving neighbours, your insurer often handles negotiations directly.