Risks in construction financing: Consumers poorly informed about protection!

Risks in construction financing: Consumers poorly informed about protection!

A current study by HDI Bancassurance, which was carried out in collaboration with YouGov, finds a significant need to catch up in providing information about risks associated with construction financing. The results show that potential people seeking financing are inadequately informed about important issues such as unemployment, incapacity to work and death. Interestingly, many respondents emphasize aspects such as interest rates and economic developments, while only 17% see unemployment as a risk that needs to be taken into account. This leads to the realization that the majority of those surveyed rarely actively ask about hedging options for these risks. Over half of those seeking financing have had nothing to do with the topic of insurance in the past.

The study highlights that 29% of those surveyed hardly obtained any further information about security after taking out construction financing. This ignorance is alarming, as topics such as unemployment, illness or death should be discussed by financing advisors during consultations. Only a third of those surveyed who were planning financing can remember advice or offers for insurance. The ignorance is particularly pronounced among groups of people who are already financed, with the topic of death insurance being the most frequently discussed in these discussions.

Opportunities for financial advisors

The authors of the study see these findings as untapped opportunities for financing advisors. Insurance offers often lead to higher completion rates, with death risk insurance having the highest completion rate. The data shows that branch banks, savings banks and independent financial advisors in particular have a need to catch up when it comes to clarification. In contrast, comparison portals and online providers perform better in terms of depth of information.

In this context, the possibility of insurance against unemployment is also important. Construction financing can be protected against the risks of job loss through special insurance in order to avoid foreclosures. Residual debt insurance steps in in such cases and covers the monthly installments for unemployment through no fault of your own for up to 24 months. Private unemployment insurance also offers an additional financial safety net, which can be available for 12 months.

Important points when hedging

It is also important to note that these insurance policies often do not provide benefits for temporary contracts or self-inflicted unemployment, such as self-termination. The insurance usually only takes effect after a waiting period of 3 to 6 months. In addition, issues such as inability to work may also be excluded from insurance, especially if there are pre-existing illnesses. The terms and conditions of the insurance policies should therefore be checked carefully to avoid unexpected exclusions.

Finally, it is essential to be aware that the financial benefits of unemployment insurance only cover a portion of the average net wage, which can put additional pressure on budget planning. Given these facts, it is critical that financial advisors proactively incorporate these topics into their discussions.

HDI Bancassurance therefore emphasizes the need to improve advice and provide more information about hedging options in order to give clients a more comprehensive picture of their financial risks. In addition, adjustments in communication should be made to actively sensitize future clients.

For further information on this topic, visit: asscompact.de and wohnora.de.