Financial institutions, when granting loans or borrowings, especially in the case of large cash and mortgage loans, encourage customers, and often even force – depending on the decision to grant a loan – to take out an insurance policy. Although this is obviously associated with considerable costs, it is a preferential solution for many borrowers. Why? Because thanks to its purchase, banks offer them lower loan costs.
However, is credit insurance really mandatory? What are its types? Can you opt out of it and what are the consequences? I explain below!
Credit insurance is a policy from which, in the event of an event listed in the General Terms and Conditions of Insurance, money will be paid out to repay the loan – experts would say. And translating it into a slightly simpler language, it’s simply a type of security that is supposed to protect both the lender, or the bank, and the borrower, or you. Before what It all depends on the type of policy. In the case of mortgage loans for many years, banks usually want us to insure ourselves in the event of death, permanent disability, inability to work or loss.
Such insurance protects not only the bank, as many think, but also us, the borrowers, and our families. It is a guarantee that if we die, get sick or lose our job, the insurer will transfer funds to pay the entire liability or pay several installments (it depends on the type of insurance and its amount). Many people do not think about it, but in the event of our death, the closest, as heirs, inherit both our wealth and our debts, including outstanding loans. If you take out a life insurance policy, the liability for paying off the loan is borne by the insurer, not the heir.
Policies concluded with credit include:
There are also insurance products tailored to specific products:
A bit of this? Do not worry. In the case of mortgages, banks most often require taking out life insurance, real estate insurance, bridging insurance, unemployment insurance and if you do not have 20 percent. own contribution – low / missing contribution insurance. And in the case of cash loans, they usually require life insurance against permanent disability, incapacity for work or loss of work.
In theory, no. This is indicated in art. 3.1. Act of May 22, 2003 on compulsory insurance, the Insurance Guarantee Fund and the Polish Motor Insurers’ Bureau. He says that only “third party liability insurance or property insurance is compulsory if an international agreement or ratified by the Republic of Poland imposes an obligation to conclude an insurance contract.” How to understand? So that when reaching for a banking product, you have the right to choose – you can insure yourself or not.
In practice, however, it looks a little different. Although insurance is not a statutory requirement, it is a bank requirement, especially in the case of large-scale mortgage loans and cash loans. However, it is not always the worst solution. For example, if you apply for a loan and you do not have 20% amounts for own contribution is often the only option to get a loan is to insure a low own contribution. If you are buying a flat from the primary market that will only have a land and mortgage register, the only way to get a loan is to purchase bridge insurance. Insurance against job loss can significantly improve your ability, and life insurance can lower your margins.
Yes, but not always at any time. It all depends on the terms of the loan agreement. Sometimes there is a provision in them that insurance can be canceled when the amount of debt decreases, sometimes after the expiry of the time specified in the contract. It also happens that the contract allows you to opt out of insurance at any time. In this case, however, you must enable analytical mode! Why? Not always giving up insurance will be profitable for us, because it may involve, for example, an increase in the margin. All because the bank, when setting credit conditions for us, assumed that its interests would be secured by insurance. If we resign from it, he has the right to change the credit terms. So before you decide to resign, calculate everything carefully!
As in the case of other credit-related matters, e.g. disbursements or overpayments, a special instruction must be submitted to the bank. In this case, regarding the resignation from the insurance / termination of the insurance contract . Of course, you will be entitled to a refund for the unused period of protection – you are entitled to this by Art. 813 of the Civil Code. How much exactly It all depends on the loan amount and the amount of the insurance premium. However, this can easily be calculated by the following proportions:
Insurance reimbursement amount = the product of the insurance policy premium paid + the quotient of the days of insurance coverage used / the total number of days of insurance coverage paid.
How much will you have to wait for this amount to be paid out? Everything will depend on the insurance policy and type of policy, on average from 14 to 60 days.
As you can see, you can opt out of insurance, but it has consequences – changing the terms of the loan. Sometimes it can be profitable after recalculating, but not always. That is why it is worth reading the terms of the loan agreement in this regard before making such a decision!
If you are hesitating, write to us, we will help you make the most favorable decision for you, and if you have already canceled your loan insurance, share your experience!