Credit insurance is a product thanks to which, on the one hand, the bank protects itself against, for example, your inability to work, and on the other – it increases your chances of earning.
Insurance companies can pay off part of your liability, and the bank can receive commissions for new customers. Compare offers from various financial institutions.
How is credit insurance accounted for?
Credit insurance is usually charged in advance – for the entire duration of the contract.
Often, the cost of all insurance is added to the loan amount and then divided into a number corresponding to the number of installments. Therefore, the monthly installment is increased by the part needed to pay the insurance. Hence – interest can be charged on a higher sum (the capital part you borrow and the amount of insurance added to it).
Remember, however, that insurance terms vary by a financial institution and the insurance company.
Credit insurance – the death of the borrower
One of the most often offered types of insurance is life insurance for a mortgage. Credit insurance can also be offered for cash loans, but from the bank’s point of view buying, life insurance for a mortgage seems more desirable. A mortgage contract has been binding you with the bank for many years and can be a guarantee of additional income for the bank.
Mortgage insurance against the borrower’s death is one of the basic insurance that banks offer.
Borrower’s death and loan insurance – collateral for the family?
Life insurance (mortgage or cash) can provide security for the family in the event of the borrower’s death. Otherwise, if the person who took out the loan goes away before paying it off fully, the commitments can go to your spouse or children.
Credit insurance – what else does it protect against?
Life insurance for mortgage is not the only financial institutions offer their clients. Other popular insurance is:
- Insurance in the event of loss of a job – usually the insurance contract provides that the insurer will repay cash or mortgage loan installments while you are out of work.
- Credit insurance against the consequences of accidents, temporary inability to work or long-term illness – in the event of incapacity for work caused by random events (accident or illness), the insurer may repay the debt.
Before you take out insurance, check the General Terms and Conditions of Insurance. This document should describe exactly all situations in which insurance measures can be activated, as well as those in which the insurer will not be able to provide you with support.
Is credit insurance – mortgage, cash – mandatory?
Loan insurance is voluntary and the bank may not require you to join them. However, he can construct the terms of the contract in such a way that it would be unprofitable to take out a loan without buying out the policy. For example, you may need to sign up for insurance to take advantage of promotional rates.
Cancellation of credit insurance – is it possible?
However, you must bear in mind that resignation from insurance can be costly – especially if you used the promotion, which was a condition for joining the insurance.
For example, if your bank has granted you a loan with a lower interest rate or a lower margin and did so because you have taken out the policy, after withdrawing from the loan insurance, you may increase the fees and also require other collateral for the liability.
On the other hand, you may also receive a refund of insurance. You will read more about this in a moment.
All the most important information on the conditions for resigning from credit insurance should be included in the contract with the bank and the GTC.
Credit insurance refund – will you get your insurance money back?
You can get a refund of credit insurance when:
- you cancel your insurance before the end of the loan period;
- you pay back the loan before the set time;
- the entire insurance amount was added to the loan amount at the beginning of the loan period;
- premiums are collected in installments, and the amount of insurance had an impact on raising interest rates and the amount of installments;
- the bank terminated the loan agreement and sold it to a debt collection company (in such a situation the amount of debt may decrease).