If a person dies, who assumes their debts in the bank?

When you apply for a loan from the bank—whether it be a vehicle, mortgage, or consumer loan—the financial institution suggests that you take out credit life insurance in case you die. In this way, your heirs will not have to be responsible for paying the debt, as explained by the Superintendence of Banking, Insurance and AFP (SBS).

Below, we detail how this insurance works, the contracting of which is not mandatory, and the modalities that the various financial entities must offer: BCP, Interbank, BBVA and Scotiabank.

What happens if I have a bank debt and die?

The SBS details that in these cases the credit life insurance that frees the heirs from the responsibility of paying the credit; That is, it covers the debt incurred in the event of death or total and permanent disability. The price of this is estimated based on the outstanding balance of the loan.

What type of coverage does credit liability insurance offer?

The most common is the basic type, which secures the balance of a debt. In this case, if the owner cannot generate income due to death or permanent disability, “the insurance company automatically takes charge of the absolute debt balance and the family members do not have to pay anything,” explains Eduardo Chávez, legal manager of the Peruvian Association of Insurance Companies (Apeseg), in an interview for La República.

The other type is the tax deduction with return. “If the person dies or becomes totally and permanently disabled, and cannot generate income, the insurance company writes two checks: one in the name of the bank for the balance of the debt and another second check for the difference with respect to the initial amount in favor of the person’s legal heirs,” adds the Apeseg spokesperson.