Is credit insurance required or not? Legal ways to cancel insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Loans are in demand offers of numerous banking institutions. They can be presented in different forms, as they can be targeted or non-targeted. But almost always, borrowers are faced with the fact that banks, even when applying for a small consumer loan, insist on an insurance policy. Therefore, citizens have a question whether insurance is mandatory or not for a loan. Some types of insurance are indeed mandatory under the terms of the law, but in most cases, the requirements of banks are illegal.

Why do I need insurance?

The insurance policy protects citizens from various insurance risks. The beneficiary of credit insurance is the bank, so the amount of the amount issued is taken into account. The number and features of insured events depend on what kind of loan is issued.

Is insurance required when obtaining a loan? In most cases, it is not necessary to buy a policy, as it is not required by law. But if a citizenrefuses to issue a policy, the bank may refuse to issue a loan.

If a mortgage is issued, then upon receipt of a loan, insurance is obligatory, and it is the purchased housing that is protected from various insured events. By law, a CASCO policy is required when applying for a car loan. In other situations, people may refuse to purchase a policy.

Peculiarities for consumer credit

This banking offer is considered the most popular among many borrowers. Is credit insurance mandatory or not if a consumer loan is being steamed? By law, banks do not have the right to insist on the purchase of such a policy, but practice shows that people who refuse to take out an insurance policy cannot receive borrowed funds from the bank.

When consumer loans insure the life and he alth of the recipient of funds. Before signing the contract, it is important to evaluate which insured events are included in this document. This usually includes the following situations:

• borrower's death;
• disability, which is possible when applying for disability of the first two groups.

In some banks, insurance is paid only on the condition that the borrower dies or receives a disability of 1 group. Compensation is not awarded if a person dies in an accident while intoxicated. If the borrower had a chronic disease before signing the contract, then if the death is related to this disease, then the payment of insurance can be appealedfirm employees. Therefore, before signing an agreement, it is important to clarify all the nuances of cooperation.

What will happen in the event of an insured event?

Many people who want to get a loan from a bank think about whether insurance is required when applying for a loan. When receiving a consumer loan, a citizen can refuse personal insurance. But in fact, the purchase of a policy is beneficial not only for banks, but also for direct borrowers. This is due to the following features:

• if an insured event really occurs, then it is the insurance company that repays the loan instead of the borrower;
• under such conditions, debts will not be transferred to the heirs of the deceased borrower;
• only the principal debt is repaid, so the citizen's relatives will still have to contribute funds to pay interest.

But the cost of the policy is considered quite high. Additionally, in practice, there are often situations when insurance companies dispute the payment of compensation, as they find various loopholes for refusal. Under such conditions, many people are unwilling to pay large sums of money for personal insurance.

Benefit for the bank

It is banking institutions that insist that their customers purchase different insurance policies. This is due to the fact that banks want to return their funds in any way. If the borrower dies without leaving behind any valuable property, then the bank will not be able to demand the return of borrowed funds from hisrelatives.

Even if the borrower simply loses his ability to work, the bank will not be able to count on receiving his funds, since the person simply will not have an optimal job and a good salary. Banks do not want to lose their funds, so they often violate even the requirements of the law, refusing to issue a loan to people who do not want to buy a personal insurance policy.

Should I take it?

Initially, the borrower must find out whether insurance is required when obtaining a loan. If it is not required by law, then you can refuse to issue it. But at the same time, it is important to evaluate not only the disadvantages of the policy, but also the positive aspects.

If a person does not want to buy a policy, then the bank employee simply refuses to issue a loan. Another option is to cancel the policy within 5 days of issuing the policy. Under such conditions, the citizen will receive a loan, as well as return the funds spent on the purchase of the policy.

Can a bank require the purchase of insurance?

Practically every modern bank requires its borrowers to purchase insurance policies. Is it necessary to take out insurance when receiving a loan? When applying for a standard consumer loan, you can not buy insurance. But people often face threats and demands from banks. For example, usually the employees of the institution argue that if the client refuses insurance, then he simply will not receive the borrowed funds.

If the bank refuses to issue a loan, then it is not obligedeven notify the client about the reasons for making a negative decision. Therefore, citizens will not be able to hold the organization liable for violation of legal requirements. As a result, many people are forced to take out extra insurance policies, which cost a lot of money to purchase.

When do you need insurance?

Any person should understand whether credit insurance is required or not. There are certain situations where the purchase of a policy is required by law. It is necessary to take out insurance when obtaining a loan in the following situations:

• registration of a mortgage, because under such conditions, based on the requirements of the law, people must take care of the safety of the acquired property, therefore, before the end of the loan term, a policy is bought for an apartment or house;
• buying a car with a car loan, because to protect the car from destruction or damage, you must definitely purchase a CASCO policy during the entire term of the loan agreement.

In other situations, people can safely refuse insurance, so banks will not be able to hold them accountable.

In order not to face a refusal to issue a loan, it is advisable to refuse the policy immediately after purchasing it and signing the loan agreement. Even if the agreement signed with the bank indicates the negative consequences if the borrower refuses personal insurance, this is a violation of the law. All pen alties and interest rate increases can be easily challenged incourt. Therefore, borrowers should be well versed in whether insurance is required for a loan from Sberbank or another banking institution. In this case, they can easily defend their rights and interests.

Features of drafting a contract

Compulsory insurance when applying for a loan can be issued directly at the bank or at a separate insurance company, which must be accredited by the selected banking institution. Before signing an insurance contract, it is important to carefully study all its conditions. These include:

• how often do you need to draw up an agreement, since you can buy a policy for the entire loan term or sign a new agreement every year;
• the amount of the insurance fee;
• number and types of insured events;
• the amount of compensation that will be paid by the company in the event of any insured event;
• features that the borrower will have to consider when receiving compensation.

Borrowers should remember that when buying insurance, the financial burden increases significantly, since the cost of policies is quite significant. It depends on the size of the loan issued by the bank. Therefore, people should know whether bank loan insurance is required in order to reduce the cost of using borrowed funds as much as possible.

What documents are required?

After the borrower finds out whether insurance is required for a loan from Sberbank or another bank, an insurance company is selected, withwhich the agreement will be made. It is possible to purchase the policy directly from the bank of your choice, but it is usually considered too expensive for many people.

To sign an insurance contract, it is necessary to prepare a certain package of documents, which includes the following papers:

• passport of the direct borrower;
• a loan agreement signed with a banking organization, and this document contains the main conditions for cooperation, the amount of the loan amount received, the loan term and other nuances;
• a statement indicating which policy the citizen wants to purchase, as well as for how long the insurance is bought, and you need to take an empty application form from the insurance company office.

Based on the loan agreement, an insurance company specialist makes a calculation, after which the citizen is notified about the cost of the policy.

Procedure for clearance

Before issuing a policy, you should decide whether or not credit insurance is required. If the borrower decides to purchase a policy, then the procedure is performed in the following sequence of actions:

• initially, an insurance organization is selected, which must be accredited in a bank where a large loan is issued;
• principles offered by this company are evaluated;
• before signing the contract, you should evaluate several offers from different companies in order to choose the most favorable conditionscooperation;
• then the borrower is determined with the optimal insurance program, and the most profitable and convenient are complex programs, which usually combine apartment insurance with personal insurance;
• if a person does not have a large amount of funds, then he may ask about different ways to pay for the policy, as many companies offer installments;
• proposed insurance contract being studied;
• if a person is satisfied with all the conditions, then he prepares the necessary documents that are submitted for study to an employee of the insurance organization;
• the number of documents depends on the requirements of the selected insurance company, but a passport, an application and a loan agreement are required as standard;
• then an insurance contract is signed, and it is advisable to use the help of a lawyer to study it;
• Paying for the policy.

Most often, citizens prefer to apply for a policy annually, so insurance is rarely purchased for the entire loan period. This is due to a significant increase in the financial burden.

Can I save on my policy?

Often, when applying for a targeted loan at a bank, insurance is required. For example, if a car loan or a mortgage is issued. Borrowers will not be able to cancel the policy, but they can use several tricks and unusual ways to save money on such an acquisition. These include:

• you should not buy an insurance policy directly from the bank with which the loan agreement is signed, as inin most cases, credit institutions offer policies at inflated rates;
• it is recommended to compare the offers of several insurance companies in order to choose a policy at the most affordable price;
• in addition, it is advisable to constantly monitor various promotions held by organizations in order to renew insurance in a timely manner at a favorable cost;
• every year you need to contact only one insurance company, because due to constant cooperation, firms usually offer customers various discounts or other opportunities to reduce the cost of the policy.

When applying for a mortgage, banks require to insure not only the acquired property, but also the life of borrowers. Under such conditions, it is advisable to buy comprehensive insurance that protects against numerous risks. Its cost will be lower compared to buying two separate policies.

Rejection of insurance after signing the contract

Most often, borrowers are interested in the question of whether insurance is required for a consumer loan. When applying for such a loan, citizens may not draw up a policy by law. But if people are afraid that the bank will simply refuse to issue borrowed funds, then people can pay for the policy, sign a loan agreement, and then cancel the insurance agreement during the cooling period. Process rules include:

• you need to draw up an application for cancellation of insurance within 5 days after signing the insurance contract;
• in the application, you can specifyany reason for such a decision on the part of the client;
• a copy of the citizen's passport, a check confirming payment for the service, a copy of the loan agreement and a direct insurance agreement are attached to the application;
• insurance companies cannot refuse to terminate the contract if the citizen applies within the established time limit, therefore the previously transferred amount of funds is paid to the person.

But you can only refuse the insurance that was purchased when applying for a consumer loan. If you refuse to insure housing purchased with a mortgage, this may lead to early termination of the loan agreement. Under such conditions, the citizen will have to return the entire amount received in full. Therefore, it is first important to understand whether credit insurance is required at VTB or another banking institution.

Can I get part of the insurance back?

Many people prefer to repay loans ahead of schedule. To do this, they periodically contribute additional amounts to repay the loan. Therefore, if the loan is fully repaid ahead of schedule, then citizens can contact the insurance company to receive part of the amount spent on the policy. To do this, you need to transfer the following documentation to the employee of the company:

• application for some part of the cost of insurance;
• insurance agreement;
• certificate from the bank confirming that the citizen repaid the loan ahead of schedule.

Based on this documentation, the specialists of the enterprisemake a calculation, after which the required amount of funds is transferred to the client's bank account. If less than half of the loan period has passed, then you can return half the cost of the policy.

Conclusion

Every borrower should know whether it is mandatory to take out insurance for a loan. Refusal of a mandatory policy can lead to an increase in interest rates, pen alties, or even early termination of the loan agreement. Therefore, you can refuse insurance only when applying for a standard consumer loan or some other loans.

If a person took out insurance and repaid the loan ahead of schedule, then he has the opportunity to return some of the funds spent on the purchase of the policy. You can cancel optional insurance within 5 days after signing the insurance contract.