Life insurance in Portugal: the mortgage requirement and family protection

With a mortgage: what the bank asks

Portuguese banks condition a home loan on a life policy (seguro de vida) covering death and, almost always, permanent disability (absolute or a percentage), for the outstanding capital, with the bank as beneficiary up to the debt. For a couple, both borrowers are usually insured at 50 % or 100 % each. The bank offers a policy from its own insurer, often bundled with rate discounts; the borrower may present an equivalent policy from another insurer — the law forbids tying the loan to the bank’s insurer — and switch later, as many do after a few years when the group premium rises with age.

Premiums are set by age, sum insured, smoking status and health; a medical questionnaire is standard, a medical examination common above certain sums or ages. Undeclared conditions are the classic reason claims fail: answer the questionnaire completely.

• Death + permanent disability: the standard mortgage cover
• Free choice of insurer — the bank cannot impose its own
• Beneficiary: the bank up to the debt; the family for the rest
• Age at entry drives the premium; renewals rise every year

Without a mortgage: term life for the family

A term policy (temporário anual renovável or fixed term) pays a lump sum to named beneficiaries on death; riders add total permanent disability, serious illness or accidental death. For a family that has just moved — one income, foreign relatives far away, children in school here — a sum of several years of income costs tens of euros a month for a healthy forty-year-old. Whole-life and savings-linked products exist but serve investment rather than protection; the office keeps clients on the simple side of that line.

Beneficiaries, tax and estates

Proceeds paid to named beneficiaries pass outside the estate under Portuguese law, which matters for foreign families: Portugal has no inheritance tax, but stamp duty of 10 % applies to gratuitous transfers on death to persons other than the spouse, descendants and ascendants; life-insurance benefits to designated beneficiaries are handled under the policy’s own rules and the stamp-duty code’s provisions — a point to check with the office’s accountants when the beneficiary is not a close relative. Foreign policies remain valid; Portuguese tax treatment depends on the beneficiary’s residence and the policy’s nature.

Questions