Is it possible to refuse mortgage insurance: bank conditions, procedures and reviews

What insurance can I refuse?

Exclusive insurance of the property transferred to the bank as collateral for payments is mandatory by law.
This means that the client will not be able to refuse to insure the structure of the apartment or house for which he is taking out a mortgage.

All other types of mortgage insurance are only voluntary.

Neither insurance of the purchase and sale transaction, the so-called title, nor insurance against loss of work, much less the life of the borrower, is mandatory.

To increase the protection of issued funds from non-return, the bank most often imposes life insurance when applying for a mortgage.

Is it legal to require insurance? ►►

Is this beneficial for only one bank? The site's editors have prepared examples of mortgage calculations with and without life insurance . Let's see what happened?

Can I get my mortgage insurance back?

Let's look at the main options for how you can get your mortgage insurance back. The condition for return is the absence of an insured event.

• After signing the loan agreement, within thirty calendar days, the citizen has the right to write a refusal and issue a refund;
• If the application from the consumer was received within 30 to 90 days after signing the contract, then the refund will be 50% of the total amount;
• Registration of a refund after full repayment of the loan is much simpler, since the encumbrance is removed from the residential premises.
• After full early repayment of the debt from the bank and provided that the possibility of return is specified in the insurance contract (policy).

Recommended article: Methods for assessing the creditworthiness of a mortgage borrower

To get your mortgage insurance back, you need to do a number of things:

• Contact the insurance company with a refund application; it must comply with the template established by law and must be written in duplicate. It is advisable to have a document confirming the absence of an encumbrance on the property;
• Receive a response in writing, stamped by the company, with a full expense report;
• In case of refusal, file a claim, indicating a reference to Article 958 of the Civil Code of the Russian Federation;
• Write a statement of claim to the court, attaching all available documentation on the mortgage loan.

According to judicial practice, such cases are mainly considered in favor of citizens.

A novelty in Russian legislation may be the adoption of a number of amendments to regulations, according to which, upon full repayment of the mortgage loan, part of the insurance premium will be returned to the borrowers.

What does the policy give the borrower?

Often, some borrowers express dissatisfaction with the need for life and health insurance when applying for a mortgage, trying in every possible way to refuse life insurance on the mortgage.

However, if you understand the essence of this type of insurance, you can understand that it is beneficial not only to the bank, but also to the policyholder himself.

So, the main purpose of life insurance when applying for a mortgage is as follows:

• protection of the financial situation of the borrower, as well as his family, from unforeseen circumstances. Thus, in the event of the death or disability of the policyholder, responsibility for repaying the remaining amount of the mortgage will fall on the insurance company and the family of the deceased will not have to bear an unbearable financial burden;
• protection of the insured's mortgaged home. Even if unforeseen circumstances arise (death, loss of the ability to continue working), the mortgaged property will remain with the borrower’s family , since the insurer will be responsible for further repayment of the loan;
• the bank receives a guarantee that the mortgage loan will be repaid.

Do you need insurance every year? ►►

What banks recommend insuring for a mortgage

When applying for a mortgage loan, the bank will offer to insure life and health, as well as the title (in case applicants for housing appear). These are voluntary types of protection. Insurance of the loaned property is mandatory on the basis of the Mortgage Law. You will pay for the insurance policy yourself at your own expense.

Any insurance for lending provides a guarantee to the bank, that is, if an insured event occurs, you, as the insured person, will not receive compensation. The insurance company covers losses to the bank when an event occurs that results in the inability to pay the mortgage.

The bank offers three types of insurance coverage:

It follows from the table that the bank has the right to require only insurance for the collateral. Other types of protection are at your discretion. But it is advisable to make a decision to purchase insurance before signing a loan agreement with the bank, because it forms the terms of service depending on its own risks.

Important! Banks do not provide insurance services, but each of them has a subsidiary insurance company and a list of accredited insurers. For example, in Sberbank, a subsidiary is Sberbank Insurance.

How to justify refusal during registration?

Undoubtedly, the client has the right to refuse life insurance immediately when applying for a mortgage.

In this case, the bank offers the borrower a different lending program, which contains more stringent conditions for issuing borrowed funds. As a rule, they are associated with an increase in mortgage rates.

In addition, the borrower
has the opportunity to refuse life and health insurance immediately after purchasing a home using a mortgage.
This can be done during the so-called “cooling off period”, which lasts 14 days from the date of conclusion of the contract.

In this case, the policyholder will be fully (if the insurance contract has not entered into force) or partially (if the insurance has entered into force) refunded the amount of the insurance premium.

If the policyholder decides to refuse life insurance a significant time (1 year or more) after the conclusion of the contract, this can have very negative consequences.

But, we must take into account that the bank may significantly increase the mortgage lending rate or even require repayment of the loan ahead of schedule.

Features of military mortgage insurance ►►

Causes

It should be noted that the borrower is not at all obliged to indicate the reasons for refusing life and health insurance under the mortgage, since the acquisition of this type of policy is carried out on a voluntary basis. No one has the right to force a client to take out such insurance.

In most banks, in the application form for refusal of life and disability insurance, there is no column at all in which it is necessary to indicate the reason for reluctance to take out insurance.

Legislation to help

At the legislative level, the borrower is not required to provide life and health insurance when applying for a mortgage.
This procedure is entirely voluntary.

In accordance with paragraph 2 of Article 31 of the Federal Law of the Russian Federation “On mortgage (mortgage of real estate)”, the borrower must insure only the mortgaged property itself , that is, the mortgaged property.

Terms and conditions of the mortgage insurance contract ►►

Therefore, if the bank forcibly insists on issuing a life and disability insurance policy, the borrower has every right to write a complaint to the appropriate authorities, where he argues for the right to refuse mortgage insurance.

Is it possible to refuse mortgage insurance?

Most citizens perceive the insurance service as an imposed action that increases the monthly amount of payments. Therefore, many are interested in the question of how you can refuse mortgage insurance.

First, let us clarify that the refusal is issued before the main loan agreement is signed. This is completely legal, since the legislation of the Russian Federation supports the freedom of action of any citizen of the country.

Recommended article: How banks check an apartment with a mortgage for legal purity

Another case is when a loan agreement is signed with the bank, but the borrower is not notified that this service is included in it. Here you will need the help of a lawyer, as you will need to send a complaint to the consumer protection department. This paper is supported by evidence that the consumer was not aware.

The final authority is the court, where a claim is filed for a refund of funds or refusal of the loan completely. This measure is taken only in extreme cases.

Advantages and disadvantages

The main advantages of life and health insurance when applying for a mortgage are as follows:

• in the event of the death of the policyholder, the policy will relieve the borrower's heirs from a significant financial burden, and will also allow them to keep their home ;
• in the event of the borrower becoming unable to work, such insurance will act as a guarantee that he will not lose the property purchased with a mortgage, and the debt to the bank will be repaid;
• For clients who have insured their life and ability to work, banks provide more favorable mortgage lending conditions;
• Life and health insurance allows the policyholder to feel confident in the future.

At the same time, this type of insurance also has a number of disadvantages, which boil down to the following:

• costs associated with obtaining insurance;
• not in all cases death or disability can be recognized as an insured event;
• If the insured event does not occur, the borrower will not be able to return the money spent on insurance.

Will interest rates be raised?

As noted above, for clients who refuse life and health insurance, banks have separate mortgage lending programs that provide for increased mortgage interest rates.
How will the percentage change without insurance? ►► On average, for borrowers without insurance, the fee for using a loan may be increased by 1-5%.

Can a credit lawyer help?

When applying for loans, many do not think about reading contracts and clarifying unclear points specified in them. The main thing for borrowers is to get a loan and solve the problems that arise. After receiving a loan and in a state of calm, the client begins to think about the nuances of accrued interest and services included in the agreement. But it is often too late.

The need for a credit lawyer often arises when applying for loans from microfinance organizations. After all, a quick microloan without guarantors with obviously extortionate conditions and interest is often the subject of litigation.

In practice, the court remains on the side of the borrower in 80% of cases, but only if his interests are represented by an experienced lawyer. You need to contact a lawyer when the bank violates the rules and regulations in the field of banking.

The main problem is that the borrower agrees to the terms of the contract, which are excessive both in terms of the number of services and the amount of payments. But such loan agreements are not illegally concluded.

After all, the borrower came himself, read the agreement and signed it. There can logically be no claims against the creditor. Who is to blame if the insured amount turned out to be slightly less than the loan amount?

That is why a lawyer is required at the stage of concluding a contract. After all, the bank is obliged to provide the borrower with a copy of the agreement for study, and there is no deadline for studying.

And remember that when submitting an application to a credit institution or insurance company, you must receive a response to the application within 10 days. If your claim is ignored or a deliberately illegal refusal, you need to contact a lawyer, and then go to court.

Don't know how to cancel insurance after receiving a loan? We will advise you on all issues of lending and insurance, and help resolve accumulated issues with overdue debts. Just call us or write online.

We will legally write off debts to banks and microfinance organizations

Our lawyer will call you in a few minutes and answer all your questions

our team

• Vladislav Kvitchenko

  CEO

• Read also:  Get a mortgage for a secondary home

  Tatiana Smirnova

  Senior bankruptcy lawyer persons

• Grigory Nechaev

  Bankruptcy lawyer persons

• Oleg Martin

  Financial analyst

• Yaroslav Mitkov

  Junior bankruptcy lawyer persons

Mortgage calculation example

In order to understand whether it is profitable to insure and refuse life insurance when applying for a mortgage, it is necessary to make an appropriate calculation.

Conditional data taken for calculation:

The client bought an apartment worth 3,500,000 rubles with a mortgage. The loan term is 10 years (10 * 12 = 120 payments). The down payment is 10% (350,000), respectively, the mortgage amount is 3,150,000 rubles.

Without insurance

Interest rate – 14%
Annuity payment will be 48,908.93 rubles per month.

The amount of overpayment on the loan for 10 years will be: 10 x 12 x 48,908.93 – 3,150,000 = 2,719,071.24 rubles.

Where is mortgage insurance cheaper ►►

In the presence of

Interest rate – 13%

Let's assume that when applying for a mortgage, the amount of life insurance is 0.65% of the loan amount. In this case, with each subsequent year, the calculation will be based on the remaining amount of the mortgage debt.

The annuity payment will be 47,032.88 rubles per month

The overpayment on the loan (excluding insurance) is equal to 2,607,333.62 rubles (for 10 years).

Insurance fee (for 10 years): 113,387.65 rubles.

Thus, the overpayment on a loan without insurance is 2,719,071.24 rubles, and with a policy – ​​2,720,721.27 rubles (2,607,333.62 + 113,387.65).

The difference between these amounts is 1,650.02 rubles.

Based on the above calculations, we can conclude that it is still more profitable to insure your life and health: firstly, the borrower will thus protect himself from serious risk, and secondly, the amount of overpayment in this case is insignificant (only 1,650.02 rubles).

Why comprehensive insurance is cheaper ►►

Life insurance for a mortgage: cost and where is it cheaper?

The calculation of the life insurance rate for a mortgage occurs strictly individually! The interest rate range for insurance is wide: from 0.5% to 2.5% of the amount of mortgage debt. Considering that a mortgage loan is valued in hundreds of thousands and millions, even one percentage point is a serious overpayment or savings.

Each bank works with several insurance companies, so you can familiarize yourself with all the rates and choose the company that is cheaper. It is better to communicate with specialists in person (although there are special calculators on the websites of insurance companies), since the cost of life insurance is calculated taking into account many parameters.

How is mortgage life insurance calculated?

An increase in the rate on life insurance rates for a mortgage occurs under the influence of the following factors:

• Age (the older the borrower, the higher the interest rate)
• Presence of chronic diseases (medical examination will be required)
• For men the rate is higher due to lower life expectancy
• If you work in a hazardous industry or in hazardous conditions
• For a large loan amount and a long mortgage term
• Presence of bad habits, non-standard height and weight ratio

Important! Do not try to hide the presence of diseases from the insurance company; if this fact becomes clear when an insured event occurs, then you or your relatives will be denied compensation.

Which banks give mortgages without insurance?

Currently, you can get a mortgage without life and health insurance in many Russian banks, since they do not have the right to refuse (this is a voluntary type of insurance).
As an example, here are several banks where you can get a mortgage without life insurance:

• "Alfa Bank",
• "Tinkoff Bank"
• "Sberbank"
• "VTB"
• Raiffeisenbank, etc.

Refund after registration ►►
In conclusion, it should be noted that when applying for a mortgage, it is still recommended to insure your life and health.

This will protect yourself and your family from the risk of losing your home, as well as from a significant financial burden (in the event of the death of the borrower).

In addition, from the above calculations it is clear that purchasing such insurance does not entail significant costs.
Refund after payment? ►►