Do You Need Property Insurance When Refinancing Your Home Loan?

Yes, property insurance is a mandatory requirement for home loan refinancing in the Philippines. Every major bank — including BDO, BPI, Metrobank, Security Bank, RCBC, UnionBank, Chinabank, and others — requires borrowers to have active property insurance as a condition of loan approval. This is not optional, and your refinancing application will not be processed without it.

The requirement exists to protect the lender's financial interest in the property. Since the property serves as collateral for the loan, the bank needs assurance that it is covered against damage or total loss from events like fire, typhoons, floods, or earthquakes. Most banks will either require you to take out a new policy through their accredited insurers or transfer your existing policy with them named as the beneficiary (mortgagee).

Philippine banks typically require two types of insurance when you refinance your home loan:

• Fire and Allied Perils Insurance (FAPI): This is the primary property insurance requirement. It covers physical damage to the structure of your property caused by fire, lightning, explosions, typhoons, floods, earthquakes, and other specified perils. This is the most universally required coverage across all lenders.
• Mortgage Redemption Insurance (MRI): This is a form of decreasing term life insurance tied to your outstanding loan balance. In the event of the borrower's death or permanent total disability, MRI pays off the remaining loan balance so the family does not lose the home. Most banks require this, though some offer it as optional or allow you to substitute it with a personal life insurance policy of equivalent value.

Some lenders may also recommend or require earthquake hazard insurance as a separate endorsement, particularly for properties in high-risk zones like Metro Manila, Metro Cebu, and parts of Mindanao.

When you refinance, your existing fire and allied perils insurance policy does not automatically transfer to your new lender. You will need to take one of the following steps:

• Endorsement transfer: If your current insurer is also accredited with your new bank, you can request an endorsement to change the named mortgagee from your old bank to the new one. This is typically the most cost-efficient option since you avoid paying for overlapping coverage.
• New policy with the new lender: Most banks make it easiest to simply take out a new policy through one of their accredited insurance providers. The cost is usually bundled into your loan or billed annually.
• Refund from old policy: Once your old loan is fully settled, your previous lender should release any claim or interest they held over your insurance policy. If you paid premiums in advance, you may be entitled to a pro-rated refund from the insurer for unused months of coverage.

Nook's advisors will guide you through this transition to ensure there is no gap in coverage between the time your old loan is settled and your new loan is activated.

Property insurance costs vary based on the insured value of the property, the location, construction type, and the specific perils covered. As a general guide:

• Fire and Allied Perils Insurance: Typically ranges from 0.10% to 0.20% of the property's insured value per year. For a property insured at 3,000,000 pesos, annual premiums would be roughly 3,000 to 6,000 pesos.
• Mortgage Redemption Insurance (MRI): Usually ranges from 0.20% to 0.50% of the outstanding loan balance per year. On a loan of 3,000,000 pesos, this could be approximately 6,000 to 15,000 pesos annually — though the premium decreases each year as your loan balance reduces.

Combined, most borrowers with loans between 2,000,000 and 5,000,000 pesos can expect to pay between 15,000 and 40,000 pesos per year in total insurance premiums. While this is an added cost, it is important to weigh it against the significant savings you gain by refinancing to a lower interest rate. At 5.99% p.a. through Nook versus a typical rate of 8% or higher, the monthly savings on a 3,000,000 peso loan alone can easily exceed 5,000 pesos — far outweighing the insurance expense.

This depends on the bank and your negotiating position. In practice, most Philippine banks have a list of accredited insurance providers and will require you to use one of them. However, the Insurance Commission of the Philippines has regulations that prevent banks from forcing borrowers to use a single exclusive insurer — you must be given a choice among accredited options.

In some cases, if you have an existing policy with a reputable insurer that is not on the bank's accredited list, you may be able to request approval for that insurer — but this is uncommon and typically requires additional documentation and underwriting review by the bank's risk team.

Practically speaking, going with one of the bank's accredited providers is almost always faster and simpler. Nook works with multiple banks and is familiar with their preferred insurance arrangements, which helps streamline the process for borrowers and avoids unnecessary back-and-forth during application.

Mortgage Redemption Insurance (MRI) is a decreasing term life insurance product specifically designed for home loan borrowers. It is tied to your outstanding loan balance — meaning the coverage amount decreases over time as you pay down your principal. If the borrower dies or becomes permanently and totally disabled during the loan term, MRI pays the remaining balance directly to the bank, ensuring the family retains ownership of the property free and clear of debt.

As for whether it is mandatory: most banks require MRI or an equivalent life insurance policy as a condition of loan approval. However, some lenders allow you to substitute MRI with a personal life insurance policy (from an accredited insurer) with a coverage amount equal to or greater than the outstanding loan balance, and with the bank named as the irrevocable beneficiary.

For borrowers refinancing from Pag-IBIG to a private bank — a very common scenario — it is worth noting that refinancing from Pag-IBIG to a private lender will require you to set up new MRI coverage with the receiving bank, as Pag-IBIG's MRI cannot be transferred. This should be factored into your total refinancing cost calculations.

Fire and Allied Perils Insurance (FAPI) covers physical damage to the structure of your property — not its contents or land value — from a range of specified events. Standard coverage typically includes:

• Fire and smoke damage
• Lightning strikes
• Explosions (gas, electrical, or mechanical)
• Typhoons, storms, and floods
• Earthquakes and volcanic eruptions (often as an add-on endorsement)
• Aircraft damage and impact from vehicles
• Riots, strikes, and malicious damage (in some policies)

It is important to understand that FAPI covers the replacement cost of the structure, not the market value of the property or the land. Banks typically require the insured value to equal the replacement cost of the building — which is calculated based on the floor area and construction type. This is why the insured value on your insurance policy may differ from your property's appraised market value.

For condo unit owners, coverage arrangements can differ because the condominium corporation typically holds a master fire insurance policy for the building structure. Individual unit owners may still need a separate FAPI policy covering interior fit-outs, fixtures, and improvements. If you are refinancing a condo, it is worth reviewing how condo loan refinancing works and confirming the exact coverage your new lender requires.

The required coverage amount for fire and allied perils insurance is based on the replacement cost of the building structure — not the outstanding loan balance and not the property's market value. Banks and insurers calculate this using the property's gross floor area (in square meters) multiplied by a standard construction cost rate per square meter, which varies by building type:

• Type I (wood/light materials): Approximately 8,000 to 12,000 pesos per sqm
• Type II (mixed/semi-concrete): Approximately 15,000 to 20,000 pesos per sqm
• Type III (concrete/masonry): Approximately 22,000 to 30,000 pesos per sqm
• Type IV (reinforced concrete/fire-resistive): Approximately 30,000 to 45,000 pesos per sqm

For example, a 120 sqm Type III concrete house would have a replacement value of roughly 2,640,000 to 3,600,000 pesos — and the insurance coverage must be at least equal to this amount. If you under-insure your property, banks may require you to top up the coverage before they approve your refinancing application. The property appraisal conducted during the refinancing process will typically confirm the correct insured value.

Yes — absolutely. Missing, lapsed, or insufficient property insurance is one of the most common reasons refinancing applications get delayed or rejected in the Philippines. Banks will not release loan proceeds until they have received and verified a copy of your active insurance policy with themselves named as the mortgagee/beneficiary.

Common insurance-related issues that cause delays include:

• Policy lapsed due to non-payment of premiums with the previous lender
• Insured value is lower than what the bank's appraisal determined as replacement cost (under-insurance)
• The insurer is not on the bank's accredited list
• The endorsement changing the mortgagee name has not been processed in time
• MRI was not arranged before the credit approval deadline

To avoid delays, start arranging your insurance documents early in the refinancing process — ideally as soon as you receive a loan offer or letter of approval from your target bank. Nook's team helps borrowers anticipate and resolve these requirements before they become bottlenecks, ensuring your refinancing closes on schedule.

Nook's mortgage advisors are experienced in the insurance requirements of all major Philippine banks and will walk you through exactly what is needed from day one. Here is how Nook helps:

• Bank matching: Nook identifies which banks offer the best rates and terms for your loan profile — including how their insurance arrangements compare — so you can make an informed decision.
• Document checklist: We provide a clear list of insurance documents you need to prepare, including policy requirements, coverage amounts, and endorsement timelines.
• Insurer coordination: Nook helps you coordinate with accredited insurers to get your policies in order before your credit approval deadline, preventing last-minute delays.
• End-to-end support: From your initial application through loan release, Nook is your single point of contact — including for insurance-related questions and issues that arise along the way.

And because Nook's service is 100% free to borrowers — we are compensated by the banks — there is no cost to you for this guidance. If you are currently paying 7%, 8%, or more on your home loan, refinancing to as low as 5.99% p.a. through Nook could save you thousands of pesos every month. The insurance requirements are straightforward once you know what to expect, and Nook makes sure you are never caught off guard.