Credit insurance is a solution that pays off not only to Credit institutions. In practice, it can also benefit the borrower – this applies to both situations covered by insurance and those that are not covered by insurance.
A significant number of consumers, at the instigation of a Credit consultant, decide to take out credit insurance, and after a few months they realize that this was not a good decision. Banks very often encourage their clients to take out insurance – this applies in particular to loans amounting to very high amounts. Thanks to this, they can be sure that in the event of death or loss of health by the debtor, the installments will be paid. Credit insurance is a very convenient solution for Portiaych institutions, but is it an equally good option for consumers? We will try to answer this question in this article.
Credit insurance – is it worth investing in it?
Credit insurance is a solution that pays off not only to Credit institutions. In practice, it can also benefit the borrower – this applies to both situations covered by insurance and those that are not covered by insurance. How does it happend? Very many banks treat loan insurance as a necessity and without it we have no chance of a positive consideration of our application. In particular, this applies to mortgage loans and cash loans amounting to high amounts. In a significant number of banks, credit insurance is only a possibility that we can, but do not have to use.
However, it is worth knowing that if we decide to take out loan insurance, in this way we can get a guarantee of interest rate reduction or cancellation of the commission. In this way, the total cost of a loan can drop significantly. Some will think: I will take out a loan with insurance and then quickly give it up. This can be done, but the banks are prepared for it – giving up insurance is often synonymous with increasing the margin, and hence the interest rate.
What exactly is credit insurance? Is it mandatory?
Credit insurance is one of the forms most often used by Credit institutions to secure debt repayment. It can be extremely helpful if the borrower finds himself in financial difficulties due to health loss or work or death. In the past, sureties, pledges and bills of exchange played a similar role to today’s insurance. In most cases, banks offer credit insurance to those who are in an unstable financial situation or their loans are for a very long period (mortgage loans).
Many borrowers wonder whether it is necessary to take out credit insurance. It turns out that banks have the right to request insurance from the customer if he does not meet all the conditions to obtain it. For example, we are talking about too low own contribution. Credit institutions agree to grant loans to people with low own contributions, but in return expect that such person will take out additional insurance.
Cash loan with insurance is used by banks much less often than insurance with mortgage loans. It is primarily determined by the extent to which the commitment is incurred. Cash loans are usually taken for a maximum of 5 years, while mortgage loans can be repaid for up to 25 or 30 years.
Recently, banks are increasingly constructing two offers for the same loan – one with insurance and the other without. In the vast majority of cases, customers are offered loans with compulsory insurance. It is basically a cheaper solution for the customers themselves due to the lower interest rate. Of course, customers can choose a loan without insurance, but then you have to take into account the need to incur higher costs.
Cash loan insurance – how does it work?
The exact operation of cash loan insurance depends on its type. Specialists currently distinguish three basic types of insurance. They are as follows:
insurance against loss of job – the insurer undertakes to repay the loan if the borrower loses his permanent job, but not through his fault. In such circumstances, the insurer does not repay the entire loan amount, only the next 6 or 12 installments. In order for the insurance to be paid out, it is necessary to provide documents confirming the borrower’s dismissal from work – e.g. a work certificate;
insurance for sickness or permanent invalidity – the insurer undertakes to repay the remainder of the loan if the borrower suffers a permanent bodily injury which effectively prevents him from carrying out his professional duties. The insurer is repaid only when the borrower submits a written application confirming his invalidity;
life insurance – if the borrower suddenly dies, the insurer must repay the remaining balance of the borrower’s commitment. For this to happen, the family or bank must submit a written application and produce documents confirming death. People who take out mortgages usually decide to take out life insurance. At present, this is the most common type of insurance. It is chosen by borrowers who do not want their loan repayments to fall on their loved ones in the event of their unexpected death.
Cash loan and borrower’s death – is it worth buying insurance?
At present, more and more Polish consumers are aware of the fact that the cash loan after the death of the borrower is not lost at all. If no insurance has been purchased, the obligation to pay the remaining installments falls on the deceased’s immediate family. Now even those who have taken a regular consumer loan for several years decide to take out loan insurance. The repayment of liabilities by the insurer in the event of the borrower’s death takes place after submission of an appropriate application by the bank or family of the deceased.
Death insurance usually covers your spouse with whom you took out the loan. Depending on what arrangements were included in the contract, the spouse may be relieved of paying installments by the insurance company in 100% or for a specified period.
Borrower’s death and insurance
Any financial liability is always part of the inheritance. The person who decides to accept it will first be obliged to pay all debts of the deceased. Only later will she have the right to manage the assets saved by the deceased person. This does not apply, of course, if the deceased has already decided to buy credit insurance – then the insurer is obliged to repay the liability at the bank. Insurance companies pay off the remaining installments after the bank or heir submits the application.
When can you insure your loan?
Credit insurance can be used not only when signing a loan agreement, but also after it has been signed. In the latter case, we must choose the advantageous offer of one insurance company on our own. After selecting an offer, please submit it to Portiai.
Before signing a contract with an insurance company, you should carefully check the detailed insurance conditions. It is good to verify in detail the list of diseases that will not be protected. When we decide to buy insurance against loss of job, it pays to check whether the payment of compensation will not disqualify us from termination by mutual agreement.
What is the cost of loan insurance?
The final cost of loan insurance is influenced by a whole host of different factors. The most important of these is of course the scope of protection chosen by the borrower. Other elements affecting the amount of credit insurance costs include, in particular, the amount and repayment date as well as the age and creditworthiness of the consumer. The insurance premium also depends on whether the total cost of insurance will be split into monthly installments or whether you pay it once.
Can you opt out of credit insurance?
Many people take out loan insurance without thinking about whether they really need it. It is only after some time that you pay back the loan that it is not necessary for us to insure that we would like to cancel it. There are no obstacles to this if the insurance premium we pay is included in the monthly installment. The second condition for giving up insurance is that it was not mandatory.
It is much more difficult when we have paid in advance for credit insurance. Then the only available solution is to ask the insurance company to refund the amount you have paid. The next case in which you can apply for reimbursement is early repayment. The reimbursement of insurance in such a case is clearly regulated by Article 813 of the Civil Code: “The premium is calculated for the duration of the insurer’s liability”. If the insurance relationship expires before the end of the period for which the contract was concluded, the insured has the right to a refund of premiums for the period of unused protection.
How do I apply for a refund of credit insurance?
The whole procedure for applying for a loan insurance refund is very simple. We can get a refund after submitting the relevant application to the bank – not with an insurance company. Such a document should contain basic information about the borrower, i.e. name and surname, PESEL number, place and date of birth, place of residence, series and policy number as well as the number of the loan agreement. However, remember to do it as soon as possible. Every day of delay can cost a lot. Unfortunately, you cannot calculate the amount you owe us. Its amount is influenced by many factors, which are described in detail in the GTC.