What Happens to Home Insurance When You Refinance Philippines

No — refinancing does not automatically cancel your home insurance policy. Your home insurance (also called a fire insurance policy in the Philippines) is a separate legal contract between you and the insurance company. It is not terminated simply because you are switching lenders.

However, what does change is the loss payee listed on your policy — the institution that receives the insurance payout in the event of a covered loss. When you had your original loan, your bank was named as the loss payee. When you refinance with a new lender, you must update this designation so that your new bank is properly protected. Failing to update the loss payee can cause delays in your loan release or complications with claims.

In short: your policy stays in force, but it needs to be updated to reflect your new lender.

Not necessarily. In most cases, you do not need to take out a completely new policy — you simply need to update your existing policy to name your new lender as the loss payee and mortgagee. This is done through a process called a policy endorsement, which your insurance provider can process on your behalf.

However, there are situations where starting a new policy may be required or advisable:

• If your existing policy is about to expire and it is more efficient to renew under the new lender's preferred terms
• If your new bank has specific insurers on its approved list and your current insurer is not on it
• If your new loan amount is significantly higher than the coverage on your existing policy, requiring you to increase your insured value

Always check with both your new lender and your insurance provider before making any changes. Your Nook mortgage adviser can help coordinate this as part of your refinancing process.

Philippine banks typically require two types of insurance when granting a home loan — and these requirements apply to refinancing just as they do to a new loan:

1. Fire Insurance (Home Insurance): This protects the physical structure of your property against fire, lightning, earthquakes, typhoons, floods, and other covered perils. The insured value must be at least equal to the replacement cost of the structure (not the market value of the property). The bank is named as the loss payee.
2. Mortgage Redemption Insurance (MRI): This is a form of decreasing term life insurance tied to your outstanding loan balance. If the borrower passes away or becomes totally and permanently disabled before the loan is fully repaid, the MRI pays off the remaining balance. This protects both the borrower's family and the bank.

Some lenders — particularly BDO, BPI, Security Bank, and Metrobank — may also offer or require additional riders such as earthquake or flood coverage depending on the location and type of property. Requirements can vary by bank, so it is always best to confirm with your specific lender.

In most cases, yes — you can keep your existing insurance provider. Philippine law and Bangko Sentral ng Pilipinas (BSP) regulations generally prohibit banks from requiring borrowers to use only the bank's in-house or affiliated insurance products. This means you have the right to use any insurance company that is duly licensed by the Insurance Commission of the Philippines, as long as the policy meets the bank's minimum requirements.

That said, your new lender will typically have a list of accredited insurance companies. Your current provider needs to be on this list for the bank to accept the policy. If your insurer is not accredited with your new bank, you have two options:

• Ask your new bank to accredit your insurer (some banks allow this with supporting documentation)
• Switch to an accredited insurer — ideally at your next policy renewal to minimise costs

Always request the accredited insurer list from your new bank early in the process so you can plan accordingly.

Mortgage Redemption Insurance (MRI) — sometimes called Mortgage Redemption Insurance or Mortgage Insurance — is a decreasing term life insurance policy linked directly to your home loan. It is designed to pay off your outstanding loan balance if you die or become totally and permanently disabled before the loan term ends.

When you refinance, your existing MRI policy does not transfer to your new loan. Because the MRI is tied to a specific loan with a specific lender, closing that loan effectively ends the MRI coverage associated with it. You will need to take out a new MRI with your new lender.

The cost of your new MRI will be based on:

• Your new loan amount and term
• Your age at the time of refinancing
• Your health status (some lenders require medical declarations for larger loan amounts)

This is an important cost to factor into your refinancing decision. However, for most borrowers who are refinancing to a significantly lower interest rate — for example, moving from 8.5% to 5.99% p.a. — the savings on monthly repayments far outweigh the cost of a new MRI premium.

Your fire insurance (home insurance) premium is primarily determined by the insured value of your property's structure and the location/risk profile of the property — not directly by your loan amount or interest rate. So refinancing itself does not automatically change your insurance premium.

However, your premium could change in these scenarios:

• Increase in insured value: If your new lender requires a higher insured value than your current policy covers (e.g., due to construction cost inflation), your premium will increase.
• Change in insurer: If you switch to a different insurance company, the premium rate may differ even for the same coverage amount.
• Change in coverage: If you add riders (e.g., earthquake, flood, Acts of God) that were not on your previous policy, your premium will be higher.
• Renewal timing: If your policy is due for renewal around the same time as your refinancing, you may notice premium adjustments reflecting general market rate changes.

Your MRI premium, on the other hand, will be recalculated based on your new loan balance and your current age. If you are refinancing a smaller remaining balance at an older age, the annual premium rate per thousand pesos of coverage may be higher — but the total insured amount is lower, so the overall impact varies.

Many Philippine banks — including BDO, BPI, and Metrobank — offer home loans where the fire insurance and MRI premiums are bundled into your monthly amortisation. This is convenient, but it also means the policies are closely tied to the loan itself.

When you pay off your existing loan through refinancing, the bundled insurance arrangements under that loan will cease. Here is what typically happens:

• Fire Insurance: If the policy was arranged and paid for annually in advance by the bank (charged to your account), you may be eligible for a partial premium refund for the unused portion. Alternatively, the policy may be endorsed to your new lender to run until its expiry date.
• MRI: As discussed, this will need to be arranged fresh with your new lender. If premiums were collected upfront for multiple years, inquire about a refund for unused coverage.

When refinancing from a Pag-IBIG (HDMF) loan to a private bank — a move many homeowners are making to take advantage of lower market rates — the insurance transition can be slightly more complex. Learn more about refinancing from Pag-IBIG to private banks and how to handle the insurance changeover smoothly.

Yes, in many cases you are entitled to a pro-rated refund of unused fire insurance and MRI premiums when you close your existing loan through refinancing. However, the exact refund amount and process depends on several factors:

• Who paid the premium: If the bank paid the insurer upfront and charged it to your loan account, the bank typically receives the refund — not you directly. Review your loan documents to understand the arrangement.
• Short-rate vs. pro-rata cancellation: Insurance companies may apply a short-rate (penalty) cancellation method rather than a straight pro-rata calculation, meaning you may receive slightly less than the exact unused portion.
• MRI refund: If your MRI was a single-premium policy (paid upfront for the full term), you may be entitled to a refund of the unearned premium. If it was paid annually, the refund applies only to the unused months in the current policy year.

To initiate a refund, you will generally need to submit a written cancellation request to your insurer along with proof that your loan has been fully paid (e.g., a certificate of full payment or release of mortgage from your old bank). It is advisable to start this process as soon as your refinancing is completed to avoid delays.

A loss payee clause (also called a mortgagee clause) is a provision in your fire insurance policy that designates a specific party — your bank — to receive the insurance proceeds in the event of a covered loss or total destruction of the property.

This clause is critical during refinancing because:

• Your old bank will need to be removed as loss payee once the loan is fully paid
• Your new bank must be added as the new loss payee before or at the time of loan release
• Most banks will not release your refinance loan proceeds until they receive confirmation that they are named as the loss payee on a valid fire insurance policy

To update the loss payee, you need to request a policy endorsement from your insurance company. This is typically a straightforward process that takes a few days, but it must be coordinated carefully with your refinancing timeline. Some banks will prepare a draft endorsement letter for you to submit to your insurer.

If there is any gap — even briefly — where the new bank is not listed as loss payee, your loan drawdown may be delayed. Plan this step well in advance as part of your refinancing checklist.

An insurance gap — even a brief one — can have serious consequences. If a fire or other covered event occurs while your home is uninsured or while the policy endorsement is in limbo, you could be personally liable for the full cost of repairs or reconstruction. Here is how to avoid that risk:

1. Start early: Contact your insurance provider as soon as you know you are refinancing. Give them at least 2-3 weeks' notice to process any endorsements or new policies.
2. Do not cancel your old policy prematurely: Keep your existing fire insurance active until your new bank has confirmed it accepts the updated or new policy. Never allow a lapse between coverage periods.
3. Coordinate with your new lender: Ask your new bank for their exact insurance requirements and list of accredited insurers before you begin the policy transfer process.
4. Get written confirmation: Once the endorsement is processed, obtain written confirmation from your insurer that the new lender is named as loss payee. Provide this to your new bank as part of your loan drawdown documentation.
5. Use a mortgage broker: Working with a broker like Nook means you have someone to help coordinate the documentation requirements — including insurance — across multiple banks simultaneously. This is especially helpful if you are refinancing a property with more complex insurance needs, such as a condominium unit in BGC, where the master policy of the building and your individual unit coverage must both be considered.

With the right preparation, the insurance transition during refinancing is straightforward. The key is communication — between you, your insurer, your old lender, and your new lender.