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Bank as Beneficiary of Buildings Insurance

Posted: Tue Apr 13, 2021 4:25pm
1 reply27 views2 members subscribed
Skewers

Posts: 21

Location: Puerto Banus

Joined: 2 Aug 2019

My mortgage provider wants me to provide buildings insurance with them as the named beneficiary. I understand this is the normal practice in Spain and if the house were to burn down the insurance money would be used to pay off the mortgage and anything left I would be able to use to rebuild the property.

I don't really understand how this works in practice as if I don't have the capital to rebuild the house and the money has gone to pay off the mortgage how do I rebuild the house? It doesn't seem to make sense to me, it seems I'm left without a proper insurance policy covering my risk.

Can anyone advise how this works in practice - do I need two buildings insurance policies, one for me, one for the bank? Or does the bank start a new mortgage and lends you the money to rebuild the house? 

Andrew14

Posted: Wed Apr 14, 2021 8:24am

Andrew14

Helpful member

Posts: 185

71 helpful points

Location: Vélez-Málaga

Joined: 26 Mar 2019

Posted: Wed Apr 14, 2021 8:24am

The mortgage loan is secured against your property. If you no longer own the property, either because you sell it, or it burns down, the Mortgage needs to be repaid - standard practice in UK, Spain and elsewhere

You then use the balance of the insurance money, along with a fresh mortgage if you need it, to rebuild ( or buy elsewhere if you can sell the site)

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