Life insurance: bank vs. broker — how much you could save

If you have a mortgage, there is a very good chance you also have a life insurance policy taken out with the same bank. You signed it on the day of completion, perhaps without anyone explaining it particularly well, and you have been paying for it ever since without ever comparing it against any other option. If this sounds familiar, read on — you may well be paying considerably more than you need to.

Why your bank's life insurance tends to cost more

When you sign a mortgage, the bank offers — and sometimes almost insists upon — a life insurance policy linked to the loan. The idea is straightforward: if something happens to you, the policy settles the outstanding debt. So far, so reasonable.

The problem lies in the dynamics of the situation. At that moment, the bank faces no competition for your attention: your mind is on the signing, the paperwork, the keys to the property. You are not going to start comparing insurance policies on that same day.

What is more, many customers do not know — because nobody tells them — that life insurance is a completely separate product from the mortgage. You can cancel it or replace it with another policy at any time without affecting your loan. The bank may apply a small difference to your interest rate conditions if you lose the associated discount, but in many cases the saving on the insurance more than makes up for that difference.

The figure that says it all: bank life insurance vs. broker

According to data from OCU and PuntoSeguro (2026), life insurance taken out through a bank costs an average of 80% more than the same level of cover arranged through an independent broker. This is not a marginal difference — it is almost double.

Perhaps most striking of all: 96% of customers have their life insurance with their bank without ever having compared it against any other option. In other words, almost everyone is overpaying without realising it.

This does not mean that the bank's policy is poor. It covers what it is supposed to cover. The issue is the price: when an institution knows it has a captive customer — because the policy was signed alongside the mortgage and the customer does not know it can be changed — there is no incentive whatsoever to sharpen the price.

A real example: how much money could stay in your pocket

Consider an illustrative scenario, not a fixed quotation. A profile of a 45-year-old with £150,000 of sum assured might pay around £150 more per year with the bank's policy than with an equivalent policy arranged through a broker. That is just £12.50 a month.

It sounds modest, but over 20 years — the typical term of a mortgage — that difference amounts to more than £3,000. Money that could have stayed in your account.

We stress again: this is an illustrative example. The actual figures depend on your age, your state of health, the level of cover you need, and the insurers available. But the order of magnitude gives a clear sense of what is at stake.

If you would like to find out more about exactly what this type of policy covers before making any decisions, we recommend our complete guide to what life insurance covers: it is written in plain language, with no small print.

What makes an independent broker different

A broker such as Segurmar does not work for a single insurer. We work with several insurance companies and compare their terms to find the one that best suits your profile and your budget. No loyalties to defend, no in-house products to push.

That is precisely what your bank cannot do: it only has access to its own product. We, on the other hand, put different companies in competition with one another for your business, and that competition translates into better prices and better cover for you.

The service is free of charge to the customer: our remuneration comes from the insurers, not from an additional charge on your bill.

What to check before making a decision

• Find your current policy and note the sum assured — the amount your beneficiaries would receive upon your death — and check whether it is still sufficient for your current circumstances.
• Check how much you pay per year (this appears on your bank statement or in the particular conditions of your policy).
• Check whether you have a mortgage discount linked to the insurance and how much your interest rate rises if you lose it. In many cases the saving on the insurance exceeds that cost.
• If your life has changed — a new mortgage, children, a change of job, a separation — the cover you signed up for years ago may no longer reflect what you need today. This article explains it very clearly: Does your life insurance still reflect your life as it is now?
• Request a no-obligation comparison before cancelling anything. That way you have the figures in front of you and can make a decision based on real information.

On linking insurance to a mortgage: what the law says

A very common question on the Costa del Sol among mortgage holders is: can the bank force me to take out its life insurance? The short answer is no. You can take out insurance with whomever you choose, provided the sum assured is equivalent to what the bank requires.

Indeed, the Spanish Supreme Court has already had to curb certain abusive banking practices related to this matter. If you were sold a single-premium life insurance policy alongside your mortgage without it being properly explained to you, you may be entitled to make a claim. You can read more about this in the following article: Was a single-premium life insurance policy slipped into your mortgage?

A single premium, in brief, is when the entire cost of the insurance is paid upfront — typically financed within the mortgage itself — rather than being paid annually. This means you have been paying interest on that insurance for years without knowing it.

If you are unsure whether this applies to you, the simplest thing to do is ask. We have an office in Marbella and are also available via WhatsApp.

When does it make most sense to review your life insurance?

Any time is a good time, but certain situations make a review particularly pressing: when you turn 40, 45, or 50 (because premiums rise with age, and switching earlier works out cheaper), when you separate or divorce, when you have a child, or when you renegotiate the terms of your mortgage.

On the Costa del Sol, many homeowners have long-term mortgages and life insurance policies they have not revisited since signing the deeds. If that is your situation, it is well worth taking a closer look. You can view all available options on our life insurance page at Segurmar, or contact us directly and we will carry out the comparison for you.

And if you still have doubts about whether the insurance you signed with your mortgage was genuinely compulsory, here is a clear, straightforward answer: Life insurance with a mortgage: is it compulsory to take it out with the bank?