Do you need life insurance (seguro de vida) in Spain?

Key rules

• Need: Life cover matters when someone depends on your income or shares your debts, and matters little if neither is true.
• Best for protection: A riesgo policy gives the most cover per euro; the premiums are lost if you never claim.
• Bank products: Savings and unit-linked policies cost more and protect less, and unit-linked returns are not guaranteed.
• Foreign policy: Have a tax adviser review any existing foreign policy before you move, as Spanish tax and reporting may apply.

Do you need life cover at all?

You need it only if someone would suffer financially if you died. No law makes you buy it. The decision below helps you work out which case you are in.

Cover makes sense if any of these apply:

• You have children or other dependants.
• Your partner relies on your income.
• You have a mortgage or loans that survivors would have to repay.
• You are self-employed, so no replacement income would arrive.
• You guarantee someone else's debt.

If you have no dependants and no debts, life cover is much less useful. You can skip it for now and revisit it when your situation changes.

If you want protection, choose seguro de vida riesgo

Seguro de vida riesgo is pure protection. It pays a set sum if you die or become disabled during the policy term. It has no savings value. It gives the most cover for each euro you pay.

The trade-off is simple. If you never claim, the premiums are gone. That is how all insurance works, and it is why the cover is cheap.

Premiums depend on your age, sex, health, smoking, the amount insured and the length of the term. For common amounts they are typically tens to a few hundred euros a year. They rise steeply with age, so someone in their 30s pays much less than someone in their 50s. Get several current quotes before you choose.

Be careful with savings and unit-linked products

Banks often offer seguro de vida ahorro or unit-linked products alongside a loan or account. They are mainly savings or investment products with a small amount of life cover attached.

• Savings (ahorro): builds a capital sum or annuity, often with a minimum return set by the insurer. Returns are often modest after fees. Cancelling early can carry penalties.
• Unit-linked: your money goes into investment funds you choose. You carry the investment risk and nothing is guaranteed. Management and fund fees apply.

Per euro, both cost more and protect less than a riesgo policy. If protection is your goal, buy riesgo and invest separately if you want to. If you are offered a savings or unit-linked product, ask for its product information document. Compare the costs and read its risk indicator before you sign.

If you already have a policy abroad

Your foreign policy usually stays valid under its own contract. But some insurers cannot serve customers living in Spain, and they may restrict or cancel the policy when you move. Ask your insurer before you go.

Once you are a Spanish tax resident, payouts, surrenders and income from the policy can be taxable in Spain under IRPF. A policy held abroad may also have to be reported on Modelo 720 if its value is above the threshold. Spanish wealth tax may apply to its surrender value too. Have a tax adviser review the policy before you move.

Practical order

1. Work out who depends on you and what debts they would inherit.
2. If you need cover, get quotes for riesgo policies and match the amount to those needs, such as your mortgage.
3. Treat any bank savings offer separately, and never as a substitute for protection.
4. Deal with any foreign policy before or soon after you arrive.

The documents list, warnings and FAQ below cover the rest.

Decide whether you need life cover and which kind

Do you need life cover, and which kind?

Does anyone depend on your income or share your debts, and what would they lose if you died?

• No life cover for now: No one depends on your income, you have no debts a partner or relative would inherit, and any savings or employer cover would already look after the people you leave behind.

• Term life insurance (pure risk cover): Partner, children or other dependants rely on your income, or you have debts such as a mortgage or loan that they would have to repay. It pays only if you die within the policy period, so it is usually the cheapest way to cover a gap that ends once the children are independent or the debt is paid off.

• Cover matched to your mortgage: The main risk is that the mortgage would fall on your family. Choose a term policy whose amount follows what you still owe. The mortgage life cover rules are set out in Life insurance tied to your mortgage and outside alternatives.

• Savings or unit-linked life product: You also want to build savings or invest, and you accept that the policy mixes protection with an investment. Compare the cost and the death cover separately from the savings part, and do not choose it only to get life cover.

Start with dependants and debts. If nobody would suffer financially from your death, you can skip cover. If someone would, subtract your savings and any cover through your employer from what they would need, and buy term cover for the shortfall. Consider a savings or unit-linked product only as a separate investment choice.

Documents you need

• The product information document of any savings or unit-linked policy you are offered, from the bank or insurer, to compare its fees, surrender penalties and risk indicator with a term policy.

• The full contract and latest value statement of any existing foreign life policy, from the foreign insurer, so a tax adviser can review it before you move to Spain.

• A statement of the value of any policy held abroad, from its insurer, in case it must be reported to the Spanish tax agency on the foreign assets form (Modelo 720) because its value is above the threshold.

Check with your insurer and a tax adviser exactly what applies to your policy and the value reporting threshold.

What to watch out for

• Bank-sold savings products give little protection: Savings and unit-linked life products usually cost more and cover less per euro than a term policy. The death cover is often small, and fees and surrender penalties can eat into returns. If protection is your goal, buy a term (riesgo) policy and keep any saving separate.

• Unit-linked products carry investment risk: With a unit-linked policy you bear the investment risk. There is no guaranteed return, and you pay management and fund fees. Only choose one if you want an investment and accept you could lose money. Do not rely on it to protect your family.

• Term premiums are lost if there is no claim: A term policy has no savings value, and the premium rises with age. You get nothing back if you outlive the policy. Treat it as protection, like any insurance. Match the term to the years your family or debts depend on you.

Frequently asked questions

How much does term life insurance cost in Spain?

For a healthy non-smoker, term life usually costs tens to a few hundred euros a year for common amounts of cover. The price rises steeply with age, so a person in their 30s pays much less than one in their 50s. Get quotes from several insurers or comparison sites.

Do I need life insurance if I have no children and no debts?

No, life cover is usually less useful if nobody depends on your income and you have no debts. It matters more if you have children, a partner on a single income, a mortgage, or you are self-employed or guarantee someone else's debt.