Many people decide to take out credit insurance (be it cash, mortgage or other), and later, during its repayment, want to opt out of it. Banks are making great efforts to ensure that their clients decide to take out insurance, especially in the case of loans for large sums. This gives them confidence that even in the unlikely event of an unfortunate event, the loan installments will be paid. Whether by the insurer or the borrower himself – it is irrelevant to the bank. Credit insurance is therefore profitable to the bank, but is it equally beneficial for the client? Is it worth to decide on insurance at all and can you opt out of credit insurance ? What is resignation from credit insurance and what is withdrawal from credit insurance ?
What does loan insurance give you?
Credit insurance pays off not only for the bank, which thanks to it can be sure that the loan will not be lossy. The borrower can also potentially benefit from it. Both in the event that the insured event actually occurs and when nothing happens. How it’s possible?
Many banks treat credit insurance as a necessity and without it we have no chance of a positive consideration of our application. This is especially the case for large-scale mortgage loans and cash loans. In other banks, on the other hand, credit insurance is completely optional and you can get a loan even without it, but it is less profitable.
Deciding on credit insurance can guarantee a lower interest rate or resignation from the commission, thanks to which we will not only be insured, but we will probably gain financially. In this case, you could come up with the idea to take out a loan on more attractive terms, and then quickly give up insurance. In fact, it can succeed, but then the relevant provisions in the contract will mean that giving up credit insurance will equal, for example, an increase in the margin, and thus a higher interest rate.
As for the benefits strictly connected with the insurance itself, they depend on what type of insurance we have concluded. It could be:
- life insurance
- insurance against permanent incapacity for work
- unemployment insurance
The most popular form of insurance is the first one, but nothing prevents you from being insured against many different factors. It will simply be more expensive.
When will insurance not be useful to us?
Many people approach all types of insurance with a large dose of suspicion. This is due to unpleasant experiences. There are situations (not only for credit insurance, but insurance in general) when we are sure that an event will be covered by insurance, after which we are bitterly disappointed. Insurance is associated with legal tricks, “small print” and a number of exclusions, which make them, in principle, often useless.
This does not mean, however, that it is always like that. All you have to do is read the GTC (General Terms and Conditions of Insurance) and other documents provided to us before signing them, and you will quickly find out if we are dealing with an attractive offer. However, you must be aware that some exclusions will always be present.
An example is life insurance. As a rule, they do not include suicide, death from drug overdose, or even death from dangerous sports. It is hard to blame the insurer for such conditions.
It is similar with unemployment insurance. For example, it may not be that it will end the employment relationship in a certain way, for example by mutual agreement. It is worth paying attention to such details. For some, they may be completely irrelevant, but for others – they can pose a huge problem later. For example, when you actually lose your job and the insurer refuses to recognize the event as insured.
Can I opt out of credit insurance?
Whether or not it will be possible to opt out of credit insurance depends on the bank, specifically the terms of the signed contract. Most popular banks allow you to opt out of credit insurance. However, this can be associated with unpleasant consequences, such as, for example, the aforementioned raising dream of credit.
You should also take into account the fact that if almost every bank allows you to opt out of insurance, then not everyone will be willing to return premiums for the unused period of the loan. Quite the opposite – most banks will not pay these contributions at all or only partially. In this case, resigning from credit insurance will not make much sense. We will lose insurance and in the event of death or loss of a job we will have to do it ourselves and we will not receive the money back. That is why it is so important to check the provisions of the contract before making any decisions.
The answer to the question of whether you can opt out of credit insurance is yes, but in many cases this will prove to be completely inadvisable. It is therefore worth considering all pros and cons, as well as carefully analyzing our insurance contract in terms of resignation.
Cancellation of credit insurance and withdrawal from credit insurance
These two terms are sometimes used interchangeably, and this is a big mistake. Withdrawal from credit insurance can only take place within 30 days of the conclusion of the contract. The exception is the situation in which we have concluded such a contract remotely. Then we also have 30 days to withdraw from credit insurance , but they count from the time we receive the necessary documents (including the General Insurance Terms and Conditions).
Is it possible to opt out of mortgage insurance?
You can insure both cash, mortgage and other loans. Exactly the same rules apply in these cases. So we can opt out of insurance, even if it is a mortgage insurance, if our insurance contract provides for this possibility. If credit insurance was a condition that you had to meet without exception to receive a positive decision, then this probably won’t be the case.
However, one should be aware that in this case the increase in total loan costs due to higher interest rates is guaranteed. In addition, the mortgage is a long-term commitment. For most people, it will be the longest and most serious debt they ever incur.
It is hard to predict what our life will look like in 5 years, let alone 15, 25 or 35. This is a huge amount of time during which many unforeseen and unfortunate accidents can occur. Then there is the probability that we will end up with a debt of several hundred thousand zlotys and the inability to pay it, for example, due to inability to work. In turn, our death will burden our heirs with debt.
How do you opt out of credit insurance?
Cancellation of credit insurance is in most cases easy and does not require much effort. It will only be necessary to apply to the bank branch where we took out the appropriate letter. We can take them there personally, but there is nothing to stop them by post.
It should contain information that we have decided to opt out of insurance as well as our basic data. I am talking about name, PESEL and date of birth. You also need the credit agreement number as well as the number and series of our policy. Your handwritten signature should be on the document.
Credit insurance – summary
Many people opt for coercion credit insurance. It does it relatively only because of the lower interest rate or commission promised by the bank. However, contrary to appearances, this is not only a necessary evil, and it can be useful in many situations.
Everyone would like to believe that nothing bad will ever happen to them, that they will not be in an accident or lose their jobs suddenly. However, life can be unpredictable and it may turn out that one of these events will take place. If we are not insured against these contingencies and we do not have considerable savings, it may plunge us financially. This is particularly dangerous in the case of mortgage loans, which, if not paid, could result in the loss of property.
If, however, we prefer to risk it, in most cases nothing will stand in our way. Usually insurance will only be optional after all. If we change our mind after that, giving up credit insurance or withdrawing from credit insurance is a simple and quick process.
However, it is worth first thinking very carefully, both in terms of what the short-term and long-term consequences will be. An example of short-term consequences may be, for example, the need to pay an additional fee for resignation from insurance. In turn, long-term consequences include an increase in the bank’s margin, which in turn will significantly increase the total cost of the loan.
The question of whether you can opt out of credit insurance is often asked for a reason. Many people feel a natural aversion to all kinds of insurance and think that the bank just wants to get the most money out of them. On the one hand, this is of course true, but on the other – the borrower obviously benefits from credit insurance, whether through collateral in the event of an accident or a lower interest rate on the loan. So this solution has both good and bad sides. It cannot be unequivocally said that credit insurance will be beneficial in every situation. However, it cannot be said that it is completely useless.