How to cancel credit insurance: instructions, nuances, recommendations and reviews

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

Recently, future borrowers are increasingly faced with the need to purchase an insurance policy, and sometimes several at once. The Bank thus seeks to insure itself against defaulted borrowed funds and increase its income. Borrowers, in turn, do not want to overpay for the imposed service and do not want to be deceived. Therefore, before applying for a loan, you need to figure out whether it is possible to refuse credit insurance. Nuances in considering different options may differ. Let's look at when you should not take out an insurance policy, and when it is better to insure yourself and your finances.

What is credit insurance?

The insurance policy is a guarantee of the return of funds taken from the bank when the borrower has an insured event.

The first reason why it is profitable for a bank to cooperate with insurance organizations is the sale of insurance policies and the receipt of agency payments frominsurance companies when selling their products to borrowers.

The second reason is that the insurance company places insurance reserves in bank deposits. Funding of financial institutions is carried out in exchange for attracting a certain number of insured persons to the insurance organization. The exchange takes place at a ratio of 7:1, where for every 7 rubles from the sold insurance, the bank receives 1 ruble from the insurance company in the form of deposits.

Why do you need insurance?

It is no secret to anyone that banks are not en titled to carry out compulsory insurance of customers. But that's in theory. In practice, in order not to get into trouble, it is necessary to read the loan agreement very carefully, so that later you don’t wonder how to refuse credit insurance and not write statements of claim. The court in each case finds out whether the borrower's receipt of a loan depends on the purchase of an insurance policy, and whether the main factor influencing the bank's positive decision is the absence or, conversely, the presence of an insurance contract. Indeed, according to one of the articles of the law "On the Protection of Consumer Rights", it is forbidden to make the purchase of certain services dependent on the mandatory purchase of others.

But of course, the need for compulsory insurance as a condition for obtaining a loan is not in the loan agreement. This phrase is camouflaged as "collateral for the performance of obligations by the borrower to the bank."So the bank, it turns out, is clean before the law.

Is it possible to cancel insurance?

In fact, when applying for a loan, credit managers impose insurance. But how do you cancel credit insurance? The instruction consists of only two steps.

Step 1. Cancellation of insurance is made immediately after the conclusion of the loan agreement. But you need to make sure that the termination of the insurance contract will not entail an increase in the annual loan interest or other "punitive" measures on the part of the bank.

Step 2. After that, an application is written to the insurance organization, and after a certain time the insurance premium will be returned in full or in part (this may be provided for in the insurance contract upon termination).

Some loan officers tell their clients the right way to cancel their loan insurance. To do this, it is enough to make monthly payments in a timely and complete manner within 6 months from the date of conclusion of the loan agreement. After the expiration of a six-month period, a written application for termination of the insurance contract should be submitted to the credit department of the bank. Why is it necessary to wait 6 months? The insurance contract is concluded for at least six months. The borrower should not be surprised when, after the termination of the insurance contract, an increased percentage will be charged on the balance of the principal debt, and monthly payments will increase. Thus, the bank compensates itself for the lost funds.

Another option how to refusecredit insurance, is to file an application with the court. Credit documents must be attached to the statement of claim, and, if possible, a written refusal from the bank.

Court practice

Based on judicial statistics, in 80% of cases the court takes the side of the borrower, forcing the lender to forcibly terminate the contract, pay insurance and recalculate the principal.

Credit insurance: how can I refuse consumer credit insurance?

As a rule, consumer lending is characterized by a short term, lack of collateral and a high interest rate. It already includes by default all the risks that the bank may incur.

But some financial institutions are pushing hard to insure the life and he alth of their borrowers. Job loss insurance is widely used. And if the first type of insurance justifies itself a little, then the borrower incurs direct losses from the second. And all because, as an insured event, the loss of work is considered not of one's own free will, but in connection with the liquidation of the enterprise or the reduction of the employee. But, as practice in Russia shows, when one of these moments occurs, the employer will lead his employee to write a statement of his own free will in order not to pay him the compensation due. Also, when applying for a loan, the bank by default includes the insurance fee in the principal amount, and the annual interest is calculated from this amount.

It is worth noting that the concept of an insured event is very confusingly formulated in the contract. Very often, when an insured moment occurs, it is practically impossible for the insured person to receive compensation. And an example of this is the clause of the insurance contract, which states that "at the slightest change in his he alth, the insured person is obliged to inform the insurer about this." But in reality, the majority simply shakes the contract, without going into details and, accordingly, not observing this condition. What the insurer uses to avoid paying. In this case, when considering how to opt out of credit insurance, the answer is to carefully study the loan agreement.

Car loan

When applying for a car loan, the borrower is required to purchase two insurance policies: life + he alth and CASCO. But at the same time, one of the clauses of the insurance contract says that it is not necessary to insure the collateral. Example: VTB Bank offers its borrowers a car loan without a CASCO policy. But at the same time, the annual percentage for which a loan is issued increases by 5-7.5 points. Therefore, in this case, it would be more correct to issue this policy.

Do I need life insurance?

But it is better for each borrower to decide for himself: refuse insurance on a VTB loan and receive an increased annual percentage or look for a bank with better offers. But life and he alth insurance is worth considering: the term of a car loan is from 2 to 5 years, and if the borrower receives a loan for a car in his youth andis not fond of fast driving, then the probability of an insured event is small.

Bank loan insurance - how to refuse a mortgage?

You can't get away from the insurance here. The law obliges to conclude an insurance contract “From the loss and damage of the collateral” (Article 31 of the Law “On Mortgage”). Two more insurance programs that the borrower can use at will are termination and restriction of property rights (title insurance), as well as loss of life and disability. But if he refuses, then the bank has the right to revise the interest rate upwards. In general, it is extremely rare to find banks whose interest rate increase does not depend on the execution of an insurance policy.

And if the annual rate increases by 1.5 points when you refuse title insurance, then the refusal to issue two policies (title and life insurance) will lead to an increase in the percentage immediately by 10 points.

The calculation of interest on insurance is as follows

• Pledged property is valued at 0.5% of the sum insured.
• Title insurance ranges from 0.1 to 0.4%.

But life insurance pulls already at 1.5% of the amount of insurance. But, taking into account the conditions under which a mortgage is issued in Russia, the need for title insurance and life + he alth for those who want to take a mortgage is inevitable.

There are mortgage programs that only insure the collateral. These programs are used by Sberbank-credit. Can I opt out of insurance under other insurance programs? Yes, but waiving title insurance will increase the annual percentage by 1 point.

The benefit for the bank, as mentioned above, is the agency fee that the financial institution receives from the insurance company when issuing policies. Therefore, it is extremely unprofitable for a credit institution to bring to the attention of the borrower information on how to refuse bank insurance for a loan.

It is also very common for a bank and an insurance company to be affiliated. It is for this reason that the bank insists that the borrower purchase insurance policies from certain insurance companies.

We hope that now each of the readers knows how to refuse credit insurance. The main thing is to carefully read the contract!