Dialog Term Life Insurance Home Financing: Your shield for your home
07.06.25
12
Minutes
Katrin Straub
Managing Director at nextsure
A home of your own is a major step, often linked to long-term mortgage finance. But what happens if the main earner’s income unexpectedly disappears? A Dialog term life insurance policy can protect your mortgage finance and spare your loved ones from financial ruin.
The topic in brief and concise terms
Term life insurance is essential when arranging a property finance deal, to protect the family from losing their home in the event of the main earner’s death; banks may even require it.
The cost of term life insurance depends on factors such as the sum insured, the term, age and health; a decreasing sum insured can reduce premiums.
Dialog Insurance offers special terms for mortgage financing, such as a short application with just two health questions and a sum insured of up to €500,000.
Essential protection: Why term life insurance is indispensable when financing a property
The dream of owning a home is a central life goal for many families, often accompanied by a mortgage lasting decades. If the main breadwinner unexpectedly dies, this can quickly become an existential threat to the surviving dependants. In this case, a term life insurance policy steps in and covers the outstanding loan amount. Some banks even require the taking out of such a policy for loans that exceed eighty per cent of the property's value. The primary purpose is to provide for the family's security so that, in the worst-case scenario, they can keep the house. Even if not explicitly required by the bank, a term life insurance policy for a mortgage is usually very sensible. The emotional strain of a bereavement should not be compounded by financial worries about the home.
Costs at a glance: What term life insurance for home financing costs
Premiums for term life insurance to cover property financing depend on several factors. These include the sum assured, the term, the age and state of health of the insured person, as well as their occupation and any risky hobbies. A 37-year-old female non-smoker with a sum assured of €250,000 and a term of 15 years, for example, pays around €12.53 per month. For a 32-year-old non-smoker with a decreasing sum assured starting at €500,000 over 20 years to cover a property loan, the cost can be around €9.81 per month. By opting for a decreasing sum assured, which is based on the outstanding balance, premiums can often be reduced. A sensible term life insurance policy is often cheaper than many people expect. This investment covers liabilities in the six-figure range in the event of the worst happening.
Tailored cover: choosing the right sum insured and term
The amount of cover should be at least equal to the full loan amount of your mortgage finance. Experts often advise additionally insuring three to five times your gross annual income, so that ongoing living costs are also covered. The term of the term life insurance must cover the entire repayment period of the loan, not just the initial fixed-interest period of perhaps ten or fifteen years. Early cancellation is possible, but it usually does not result in a refund of premiums. There are various models for the sum insured:
Constant sum insured: Remains the same throughout the entire term and is suitable when, in addition to the loan, living costs are also to be covered.
Linearly decreasing sum insured: Falls each year by a fixed amount, which reduces the premiums.
Annuity-decreasing sum insured: Adapts to the loan’s declining outstanding balance and is often the most cost-effective option for pure loan protection.
Careful planning of the sum and term is crucial for seamless protection. For example, Dialog Versicherung offers various sum-insured progressions with RISK-vario®, including annuity-decreasing variants. This allows flexible adaptation to your financial situation.
Dialog term life insurance: Specific benefits for builders
Dialog Lebensversicherungs-AG, a company in the Generali Group, has special offers for securing property financing. One advantage is the short application with just two health questions for property financing up to a sum insured of EUR 500,000. This significantly simplifies the application process. Tariffs such as RISK-vario® Premium offer additional benefits, for example a building bonus or a temporary 10 per cent increase in benefits (maximum EUR 30,000) if the death occurs within one year of purchasing the property. Such specific clauses can make an important difference in an emergency. Dialog Versicherung places value on clear definitions, for example when it comes to pre-existing conditions that do not need to be disclosed. For builders, it is advisable to check the exact terms and options.
Expert tips for your term life insurance for property financing
When securing your property finance with term life insurance, there are several important points to note. If both partners are employed and contribute to the financing, both should also be covered accordingly. For unmarried couples, the tax situation is relevant: the allowance for inheritance tax is only twenty thousand euros here, compared with five hundred thousand euros for spouses. With careful contract structuring (the policyholder is also the beneficiary), inheritance tax can often be avoided. Our expert tip: check whether a guaranteed insurability option is available. This allows you to adjust the sum insured for certain events (e.g. the birth of a child, a salary increase) without undergoing a new medical assessment. Dialog offers such options in its tariffs, often up to the age of 49. Honest answers to the health questions are essential to avoid jeopardising the insurance cover. Term life insurance without medical examination is rare and usually comes with disadvantages. At least for property financing, Dialog does allow a simplified application with just two health questions.
Understanding legal aspects and alternatives
Term life insurance is the most common way to secure mortgage financing, but there is also residual debt insurance. This is often more expensive and less flexible, but it can also cover risks such as unemployment. From a legal perspective, term life insurance policies are subject to the German Insurance Contract Act. It is important to provide all required information correctly in the application. Incorrect details can lead to refusal of benefits. In the event of a claim, that is, when the term life insurance is paid out, the agreed sum is paid to the beneficiary. Make sure you know who is listed as the beneficiary to ensure that the money is also used as intended. It is important to know when a term life insurance policy does not pay out, for example in the event of suicide in the first few years or undisclosed pre-existing conditions. The exact conditions can always be found in the respective contractual documents.
A Dialog term life insurance policy can be a crucial component in securing your property finance and your family. The costs are often lower than assumed, especially when you consider the potentially insured sum of several hundred thousand euros. By choosing the right sum assured, term and tariff options, such as those offered by Dialog with RISK-vario®, tailored, needs-based cover can be created. Securing the biggest financial project in life should not be taken lightly. A life insurance as security when buying a house provides peace of mind and protects against incalculable risks. Also think about protecting your family with a term life insurance policy for family protection. Request an individual risk analysis now: Have your insurance situation checked free of charge and receive concrete suggestions for optimisation.
More useful links
The German Insurance Association (GDV) offers a publication with current figures on German life insurance in 2024.
Statista provides comprehensive statistics and information on the topic of life insurance in Germany.
The University of St. Gallen provides a study on term life insurance in Germany.
Wikipedia provides a basic overview and definition of term life insurance.
Statista shows the development of mortgage interest rates in Germany using current survey data.
The Deutsche Bundesbank publishes detailed statistics on interest rates for housing loans to private households.
The Federal Statistical Office (Destatis) provides information on construction prices and the property price index in Germany.
FAQ
What happens if I die during the term of my mortgage and do not have term life insurance?
Without term life insurance, the debt burden passes to your heirs. If they cannot manage the repayments, in the worst case the property may have to be sold, often below market value.
Should I choose a constant or a decreasing sum insured?
For the sole purpose of covering the outstanding debt of a property finance arrangement, a decreasing (often annuity-decreasing) sum insured is usually more suitable and cheaper. If the family's living expenses are also to be covered, a constant sum or a combination may make sense.
How long should the term of my term life insurance for mortgage financing be?
The term should cover the entire repayment period of your loan, i.e. until the final instalment is paid, not just the duration of the initial fixed-interest period.
Can I still adjust my term life insurance later?
Many plans, including those from Dialog, offer guaranteed insurability options. This allows you to increase the sum insured without a new medical assessment in the event of certain life events (e.g. birth, marriage, property purchase).
What is the difference between term life insurance and loan repayment insurance when financing a property?
Term life insurance pays out an agreed sum in the event of death. Loan protection insurance is often directly linked to the loan, usually more expensive and less flexible, but can sometimes also cover other risks such as unemployment.
Do unmarried couples need to bear anything special in mind when taking out term life insurance for mortgage financing?
Yes, the tax-free allowance for inheritances is significantly lower for unmarried people at twenty thousand euros than for married couples. Clever structuring of the contract (policyholder = beneficiary) can help avoid inheritance tax.
