Risk life insurance (rizikové životní pojištění)
Life insurance without a savings or investment component that pays out the sum insured on death, or on disability or serious illness of the insured person. With a mortgage it is taken out with a sum insured covering the debt and often assigned in favour of the bank. Banks usually do not make it compulsory but reward it with a rate discount. The sum insured may decrease as the debt falls.
Example
The family's main earner has a CZK 4,000,000 mortgage over 25 years at 5.00 % (payment CZK 23,384). With cover against death for a sum insured of CZK 4,000,000, plus third-degree disability, the insurer repays the remaining debt if he dies, and the survivors do not inherit the flat together with the mortgage.
In practice
Taking out the policy involves a health questionnaire, and untrue answers allow the insurer to refuse payment. Compare the bank's own product with an offer from another insurer; banks usually accept an external policy with an assignment. Insure both partners if the payment would be unmanageable on one income alone.
How it differs
Payment protection insurance covers individual payments during sick leave or after a job loss, while risk life insurance pays a lump sum on death or disability. Investment life insurance is mostly savings with a small risk component, and an expensive way to protect a mortgage.
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