Yes, you can choose the insurer for your mortgage life insurance (crédito à habitação) in Portugal. The bank may require suitable cover, but the law obliges it to accept a policy from another insurer that offers equivalent protection, and you can switch policy during the loan. The point to weigh carefully is the spread (the bank’s margin over Euribor): some banks offer a discount if you take their insurance, and that is where it pays to run the numbers.

What Portuguese law says

Two main pieces of legislation protect mortgage borrowers:

Decree-Law 222/2009, which introduced information duties for life insurance sold alongside mortgages. Among other things, the bank must tell you that you may take out the policy with the insurer of your choice, use a life policy you already hold (if it meets the minimum requirements) and take out a new policy to replace the first one as security for the same loan.
Decree-Law 74-A/2017, which governs mortgage credit agreements. Article 11 prohibits the bank from making the loan conditional on compulsory purchase of other products, with two exceptions: it may require a current account (and must accept one at another bank), and it may require suitable insurance, provided it accepts a policy from another provider offering equivalent cover.

Decree-Law 222/2009 also requires the sum insured to follow the outstanding loan balance, with that reduction reflected in the premiums. In practice, as you repay the loan, the amount covered falls and the premium should follow suit, although your age also affects the price.

The 2026 changes: the bank can only require death cover

Law 14/2026 of 27 April amended Article 11 of Decree-Law 74-A/2017. Since May 2026, where a bank requires life insurance, it can only require death cover. Disability cover is now optional: the bank may offer it, for example as a way to reduce loan costs, but it cannot impose it.

The same law allows the borrower to replace the life insurance, at their option, with another guarantee recognised by law, such as a mortgage over another property or a personal guarantee (fiança). And for couples where one partner has a disability of more than 60%, the insurance may be required from the other partner only, if the borrower so chooses.

An important note: disability cover no longer being compulsory does not mean it is no longer useful. A serious disability can affect your ability to keep up repayments just as much as death. In many cases I still suggest considering disability cover; the difference is that the choice is now yours.

If you already have a mortgage, check with me and with your bank how these rules apply to your agreement.

The spread: where the maths matters

Banks may offer better terms, especially a lower spread, if you buy other products from them, such as life insurance. This is known as optional bundling (venda associada facultativa): it is legal, provided it is a choice and not a condition.

In these cases the bank must show you the APRC (TAEG in Portuguese, the annual percentage rate of charge, which combines interest, fees and insurance) with that reduction, and a simulation of the monthly payment for each spread discount. Use that information to your advantage.

For a balanced decision, compare two scenarios over the remaining term of the loan:

Insurance with the bank: repayment with the reduced spread + the bank’s insurance premium.
Insurance with another insurer: repayment without that spread discount + the alternative premium.

Sometimes the spread discount wins and the bank’s package is cheaper overall. In other cases the saving on insurance outweighs the higher spread. There is no single answer, just sums to do, and that is exactly what I do with you. Always check your loan agreement to see whether the spread reduction depends on the insurance and what happens if you change it.

If your mortgage life insurance was taken out many years ago, especially if it was arranged through the bank when you bought the home, a new policy is very likely to bring very significant discounts. The saving can reach hundreds of euros a year. Every case is different and depends on age, outstanding capital and health, so always compare the cover and the total cost, including the effect on the spread. Contact me quickly: the sooner we check, the sooner you start saving.

How to switch your mortgage life insurance

If you decide to switch, the process usually looks like this:

I request quotes based on the outstanding balance, the remaining term and the cover the bank requires.
You complete the new insurer’s health questionnaire (and any tests requested).
Once accepted, the new policy is issued with the bank as beneficiary, up to the amount owed.
The policy is sent to the bank, which checks it meets its requirements.
Only once the bank has accepted it is the old policy cancelled.

That last step is essential. Never cancel your current policy before the new one has been accepted by both the insurer and the bank: you would be left uninsured and in breach of your loan conditions.

What to compare besides price

The definitions of disability (if you choose that cover).
Exclusions and the maximum age of cover.
Whether the premium is calculated on the updated outstanding balance.
Acceptance terms: a new health assessment may bring a loading or exclusions your old policy did not have.

Frequently asked questions

Can the bank refuse my policy from another insurer?

Only if the policy does not provide equivalent cover to what is required (for example, an insufficient sum insured or term). If it meets the requirements, the bank should accept it.

Can I change my life insurance partway through the mortgage?

Yes. The law expressly allows you to take out a new policy to replace the first one as security for the same loan. Check the effect on your spread first.

Is disability cover compulsory for a mortgage in Portugal?

Since May 2026, banks can only require death cover. Disability cover is optional, although it is often worth considering.

Could you save?

If you like, I will compare your current policy with alternatives and run the numbers including the spread, with no obligation: request your review here or contact me.

Sources

General information only. It does not replace reading your policy conditions or personalised advice.