Mortgage Insurance in Romania: Which Policies the Bank Requires, What the Law Lets You Choose, and What It Costs

Israeli buyers who finance a property in Romania with a loan from a Romanian bank usually focus on the interest rate and the loan-to-value ratio. The insurance almost always comes at the end, in a list of documents to be provided before signing. That is a mistake, because the premiums are part of the monthly cost throughout the life of the loan.

This guide explains which policies are usually required, what the Romanian consumer law framework is, and how to compare bank offers so that the insurance does not take you by surprise.

1Which insurance is required for a mortgage in Romania?

Usually three, but only one of them is mandatory by law for every homeowner, regardless of the mortgage:

2Why is PAD insurance not enough for the bank?

Because its cover is narrow. PAD is sold at a fixed price and covers only three risks: earthquake, landslide and flood. It does not cover fire or water damage, so it is not what protects the loan. The bank will want to see a valid PAD, among other reasons because optional policies are usually issued on top of an existing PAD, but it will also ask for property insurance.

3How does property insurance assigned to the bank work?

The bank asks for insurance on the building, usually at least in the amount of the loan or in the amount of the value set by the bank's valuation. The policy is assigned in favour of the bank (cesiune, an assignment of rights). If the home is damaged, the insurer pays the bank first, up to the amount of the remaining debt.

• Who sets the cover: the bank, not the insurer. Ask for the minimum sum insured in writing, in lei or in euros, before you request quotes.
• When the assignment ends: on repayment of the loan. After the last payment, ask the insurer to remove the bank from the policy.
• Who is responsible for renewal: you. What happens if the policy expires is explained below.

4Is life insurance mandatory?

Not by law. It depends on the bank. Banca Transilvania writes that life insurance is not mandatory for a mortgage and that an existing policy may suffice. UniCredit's list of documents includes enrolment in the bank's life insurance only if you chose it. Other banks may set it as a condition, or offer different terms with and without the insurance. The binding answer is in the offer you receive.

Published product documents show what policies distributed by banks look like:

5What are you entitled to insist on under the law?

Article 12 of Government Emergency Ordinance 52/2016, which governs credit agreements for consumers relating to immovable property, is short and worth knowing before the meeting at the bank:

1. Choice of insurer. The bank may not require you to insure with a company it has approved, and must accept a policy from another company if the level of cover is equivalent (Article 12(3)).
2. No unnecessary insurance. The bank may not require insurance that is of no use to that loan agreement (Article 12(8)).
3. An expired policy. The bank may insure in your name and at your expense, for one year at most and at a market price, only after written notice at least 15 days before expiry, and must send you a copy within 15 days (Article 12(4) to 12(6)).

Anyone living in Israel and holding a property in Romania should set up the renewals by standing order. A policy the bank takes out in your name is lawful, but you lose control over the price.

6How does insurance affect comparing offers between banks?

Under Article 3 of the Ordinance, the total cost of credit includes insurance premiums where the insurance is a condition for obtaining the loan or for obtaining it on the terms offered. This cost is included in the annual percentage rate of charge (DAE).

The trap lies precisely in the policy presented as optional: it may not be included in the DAE, and yet the bank can offer a lower margin to whoever takes it. Therefore compare offers by the full monthly outlay: the repayment plus all the premiums.

7How much might it actually cost?

Illustration only: a loan of EUR 210,000, which is 70% financing on a property of EUR 300,000. According to the source, for buyers from abroad financing is up to 70%, with equity of at least 30%. At the rate of 0.04% a month published in one bank's leaflet:

• Life insurance in the first month: EUR 210,000 times 0.04%, about EUR 84.
• Life insurance in the first year: about EUR 1,000, and the amount falls slowly with the balance.
• PAD: 130 lei a year for a type A building, about EUR 24 at a rate of about 5.35 lei to the euro.
• Property insurance: according to quotes. Ask two or three companies.

The rate comes from one bank's leaflet, not a market average. The rate relevant to you appears in your bank's offer.

8What to do before signing, and how we accompany the financing

• Ask the bank in writing which policies are mandatory, what the minimum sum insured is, and whether the margin changes without life insurance.
• Obtain two or three quotes for property insurance from companies not belonging to the bank, with the cover the bank requires.
• Make sure the DAE includes the mandatory premiums.
• For life insurance, read the age limit, the exclusions and the medical questionnaire before signing.
• Buy PAD in your name from the day the property is registered in your name, and set up every renewal by standing order.
• After repayment, remove the bank from the policies.

We help Israeli buyers read the bank's offer and the policy terms, and understand which requirements stem from the law and which from the bank's policy. The loan agreement and the mortgage are signed before a notary in Romania, and insurance advice is given by an authorised intermediary.

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The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.