Loans are sought after by 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 obtaining an insurance policy. Therefore, citizens have a question whether insurance is mandatory for loans. Some types of insurance are truly compulsory 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 in credit insurance is the bank, therefore, the amount of the issued amount is taken into account. The number and characteristics of insured events depend on which loan is issued.
Is insurance required when obtaining a loan? In most cases, buying a policy is not necessary, as it is not required by law. But if a citizen refuses to issue a policy, then the bank may refuse to issue a loan.
If a mortgage is issued, then upon receipt of a loan insurance is required, and it is 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.
Features for a consumer loan
This bank offer is considered the most popular among many borrowers. Is loan insurance obligatory or not if a consumer loan is stepped up? 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.
With consumer loans, the life and health of the recipient of funds is insured. Before signing the contract, it is important to evaluate which insurance events are included in this document. Usually this includes the following situations:
- borrower's death;
- disability, which is possible with the 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 group 1. No compensation is awarded if a person dies in an accident while intoxicated. If the borrower had a chronic illness prior to signing the contract, then if the death is related to this illness, then the payment of insurance may be appealed by the employees of the company. Therefore, before signing the agreement, it is important to clarify all the nuances of cooperation.
What happens when an insured event occurs?
Many people who want to get a borrowed amount from a bank think about whether insurance is required when applying for a loan. Upon receipt of a consumer loan, a citizen may refuse personal insurance. But in fact, the acquisition of a policy is beneficial not only for banks, but also for direct borrowers. This is due to the following features:
- if the insured event really occurs, then it is the insurance company that repays the loan instead of the borrower;
- under such conditions, debts will not go to the heirs of the deceased borrower;
- only the main debt is repaid, therefore, anyway, the citizen’s relatives will 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 different loopholes for refusal. Under such conditions, many people do not want to pay large sums of money for personal insurance.
Benefits 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 any valuable property, the bank will not be able to demand the return of borrowed funds from its relatives.
Even if the borrower simply loses his ability to work, the bank will not be able to count on receiving his funds, as the person simply will not have optimal work and a good salary. Banks do not want to lose their money, so they often violate even the requirements of the law by refusing to grant loans to people who do not want to buy a personal insurance policy.
Do I need to take?
Initially, the borrower must find out if insurance is required when obtaining a loan. If it is not required by law, then you can refuse to design it. But 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 possibility is a cancellation of the policy within 5 days after its execution. Under such conditions, a citizen will receive a loan, as well as return the funds spent on the purchase of the policy.
Can a bank require a purchase of insurance?
Almost every modern bank requires its borrowers to purchase insurance policies. Is it obligatory to take out insurance upon receipt of a loan? When you make a standard consumer loan, you can not buy insurance. But people often face threats and demands from banks. For example, usually employees of an institution claim that if a client refuses insurance, then he simply will not receive borrowed funds.
If the bank refuses to issue a loan, then it is not obliged to even inform the client about the reasons for making a negative decision. Therefore, citizens will not be able to hold the organization accountable for violating legal requirements. As a result, many people are forced to draw up extra insurance policies, for the purchase of which quite a lot of money is spent.
When is insurance needed?
Anyone should understand whether insurance is mandatory for a loan. There are certain situations when the purchase of a policy is required on the basis of the provisions of the law. It is necessary to take out insurance when obtaining a loan in the following situations:
- mortgage registration, since under such conditions, on the basis of the requirements of the law, people should take care of the safety of the acquired property, therefore, before the loan term expires, an apartment or house policy is bought;
- buying a car with a car loan, because to protect the car from destruction or damage, you must certainly 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 its purchase and signing of the loan agreement. Even if the agreement signed with the bank indicates negative consequences if the borrower refuses personal insurance, this is a violation of the law. All fines and interest rate increases can easily be challenged in court. Therefore, borrowers should be well versed in whether insurance is mandatory for loans with Sberbank or another banking institution. In this case, they can easily defend their rights and interests.
Features of the contract
Compulsory insurance when applying for a loan can be issued directly at the bank or in a separate insurance company, which must be accredited at the selected banking institution. Before signing an insurance contract, it is important to carefully study all of its conditions. These include:
- how often you need to draw up a contract, because you can buy a policy for the entire loan term or annually sign a new agreement;
- amount of insurance fee;
- number and types of insured events;
- the amount of compensation that will be paid by the company upon the occurrence of any insured event;
- features that the borrower will have to consider when receiving compensation.
Borrowers must remember that when buying insurance, the financial burden increases significantly, since the cost of policies is quite substantial. It depends on the size of the loan issued by the bank. Therefore, people should know whether credit insurance at the bank 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 mandatory for a loan at Sberbank or another bank, the insurance company with which the agreement will be concluded is selected. You can purchase the policy directly at the selected bank, but usually its cost is considered overpriced 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 provides the basic conditions for cooperation, the amount of the borrowed amount, the loan term and other nuances;
- an application stating which policy the citizen wants to purchase, as well as for how long the insurance is purchased, and you need to take an empty application form at the insurance company branch.
On the basis of the loan agreement, an insurance company specialist makes a calculation, after which the citizen is notified of what the cost of the policy will be.
Clearance procedure
Before applying for a policy, you should decide whether insurance for loans is required or not. If the borrower decides to purchase a policy, the procedure is performed in the following sequence of actions:
- initially, an insurance organization is selected, which must be accredited by the bank, where a large loan is issued;
- The basic conditions offered by this company are estimated;
- Before signing the contract, several proposals of different companies should be evaluated in order to choose the most favorable conditions for cooperation;
- Further, the borrower is determined with the optimal insurance program, and the most beneficial 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 of paying for the policy, since many companies offer installments;
- the proposed insurance contract is being studied;
- if a person is satisfied with all the conditions, then he prepares the necessary documents that are handed over for study to the employee of the insurance organization;
- the number of documents depends on the requirements of the selected insurance company, but a passport, application and loan agreement are usually required;
- then an insurance contract is signed, and it is advisable to use the help of a lawyer to study it;
- payment of the policy is made.
Most often, citizens prefer to apply for a policy annually, so insurance is rarely purchased for the entire loan term. This is due to a significant increase in financial burden.
Is it possible to save on the policy?
Often, when applying for a targeted loan at a bank, insurance is required. For example, if a car loan or mortgage is issued. Borrowers will not be able to refuse the policy, but at the same time they can take advantage of several tricks and unusual ways to save on such an acquisition. These include:
- you should not buy an insurance policy directly at the bank with which a loan agreement is signed, since in most cases credit organizations offer policies at inflated prices;
- 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 stocks held by organizations in order to timely renew insurance at a favorable cost;
- annually you need to contact only one insurance company, because due to constant cooperation, companies usually offer customers different discounts or other opportunities to reduce the cost of the policy.
When applying for a mortgage, banks require insurance not only for acquired property, but also for the life of borrowers. Under such conditions, it is advisable to buy comprehensive insurance that protects against numerous risks. Its cost will be lower in comparison with the purchase of two separate policies.
Refusal from insurance after signing the contract
Most often, borrowers are interested in the question of whether insurance is mandatory with a consumer loan. When applying for such a loan, citizens may not have to apply for a policy under the law. But if people fear that the bank will simply refuse to issue loans, then people can pay for the policy, sign a loan agreement, and then, during the cooling-off period, refuse the insurance contract. The process rules include:
- Draw up an application for cancellation of insurance is necessary within 5 days after signing the insurance contract;
- the statement may indicate any reason for such a decision by the client;
- a copy of the citizen’s passport, a check confirming payment for the service, a copy of the loan agreement and the direct insurance agreement are attached to the application;
- insurance companies cannot refuse to terminate the contract if a citizen makes an application within the prescribed time period, therefore, the previously transferred amount of funds is paid to the person.
But you can only refuse insurance that was purchased during the processing of a consumer loan. If you opt out of home insurance purchased on a mortgage, this may lead to early termination of the loan agreement. Under such conditions, a citizen will have to return the full amount received in full. Therefore, it is preliminary important to understand whether credit insurance is obligatory at VTB or another banking institution.
Is it possible to return part of the insurance?
Many people prefer to repay loans ahead of schedule. To do this, they periodically make 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, transfer the following documentation to the company employee:
- an application for a certain part of the cost of insurance;
- insurance agreement;
- Bank certificate confirming that the citizen repaid the loan ahead of schedule.
Based on this documentation, the company's specialists make a calculation, after which the required amount of funds is transferred to the client’s account in the bank. If less than half of the loan term has passed, then you can return half the cost of the policy.
Conclusion
Each borrower must know whether it is mandatory to take out insurance with a loan. Refusal of a compulsory policy may lead to an increase in the interest rate, accrual of fines, 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 has issued insurance and repaid a loan ahead of schedule, then he has the opportunity to return some of the funds spent on the purchase of the policy. You can refuse optional insurance within 5 days after signing the insurance contract.