Changing insurance companies after a mortgage deal is one way to cut costs during the loan repayment period. We figure out whether it is always possible to change insurance and what accompanying this process.
The price of a real estate insurance policy, without which it will not be possible to get a loan to buy a home, can reach several tens of thousands of rubles. Under standard terms, a mortgage insurance contract is concluded for one year or for the entire loan term, but always with an annual payment Asian Wedding Photographer In Leicester.
When applying for insurance for a mortgage at a bank, the conditions under the policy may not be the most favorable. Therefore, borrowers have the right to change the insurance company throughout the entire loan period and choose a cheaper policy. However, if this happens, for example, in the middle of the paid period, then you can lose due to penalties when returning funds for the unused insurance period. If you cancel the real estate insurance policy in the middle of the paid period (for contracts executed from September 1, 2020), you can return no more than 50% of the paid amount. For other types of policies (life and health insurance and title insurance), the amount to be returned is determined in proportion to the time the insurance is used.
It is best to change the insurance on the day the paid period ends. It is worth starting preparations for changing the contract in advance in order to choose the best alternative to the old contract, notify your bank and your insurer of the decision to change the policy, and also provide the necessary documents to the new insurer and then transfer the new policy to your mortgage bank.
How to choose a new insurer
The first step is to see if there is a clause in the insurance contract on the accrual of fines for premature termination of the contract. It is also worth checking the list of insurance companies accredited by the creditor bank. The bank may not accept a policy from a company not on the list. You can challenge this decision by contacting the Central Bank of the Russian Federation, but this is a long and complicated process.
Price is not the only criterion to consider when choosing a new company. Be sure to ask how the company handles insured events, whether it is possible to buy a policy online, if it is important. In addition, each company has its own requirements for documents and tariffs.
“For our company, the list of documents looks like this: passports of the insured and insured persons, loan agreement and loan payment schedule, title documents for the property, appraisal report. If additional title insurance is required, documents are requested depending on the type of previous transaction,” commented an employee of Sovcombank Insurance.
Banki.ru can issue a mortgage insurance policy for cooperation with 28 banks and only in insurance companies accredited by banks. Even before applying for a mortgage at a bank, you can find out the cost of the policy in 9 companies at once in order to obtain a policy profitably.
All data about the insured and the loan are entered online, after payment, the new policy is immediately sent to your email and can be sent to the bank. “The price of insurance for a mortgage directly depends on the current debt to the bank, and the payment is recalculated annually depending on the loan balance: the smaller the balance, the cheaper the insurance.
Each company sets its own rates.For real estate insurance, as a rule, the cost of the policy is calculated as a percentage of the debt amount (0.09–0.25%). For life and health insurance, the cost of insurance depends not only on the balance of
the loan, but also on the gender and age of the borrower: the older the insured, the higher the rate. Estimated life and health insurance for a mortgage, depending on age, can cost 1.1-2.4% of the debt amount, ”says the product owner of insurance productsJulia Korneeva .
The main reason mortgage borrowers change insurance companies is to save money on payments. A difference of even 2 thousand rubles a year can result in a significant amount over 10 years.
“Check that the names of the risks match the information from your previous policy, the sum insured is equal to the current balance of the loan debt, so that the co-borrowers are insured if they were in the original coverage,” explained Denis Titov , director of the department of property insurance of individuals at AlfaStrakhovanie.
Is it possible to switch to another insurer partially
By law, mortgage lenders are required to insure only mortgaged real estate, but banks often insist on taking out life and health insurance, and when buying housing on the secondary market, on covering the risks of invalidating the transaction (title insurance).
All these risks can be insured separately in different companies. Also, different risks can be insured in different companies when a client purchases housing under construction, Sovcombank Insurance said. In this case, when obtaining a loan, it is necessary to insure only life and health, and after registering the ownership of the apartment, draw up another property insurance contract.
But more often when applying for a loan, a comprehensive insurance contract is still concluded. Therefore, if you want to change insurance, it will be difficult to issue, for example, a new life insurance contract in a new company, and it will be difficult to leave property and title in the old one.
“Nevertheless, if the client really wants to insure one of the risks in another company, then he can apply to the existing insurance company to exclude the insured risks from the contract. The insurer has no right to refuse to exclude risks from the contract. And with a new company, it is already possible to conclude an agreement on this risk and provide the bank with a prolongation of a previously concluded policy with an updated list of risks, plus an insurance agreement for one of the risks with a new insurance company . However, there is a possibility that the bank may not accept new policies, so it is important to prepare arguments for the lender in advance,” Lidia Yefimova, deputy director of the mortgage insurance department at Absolut Insurance,
Do I need to terminate my current insurance contract?
After purchasing a new policy and after the creditor bank has accepted it, the old insurance contract must be terminated if it is no longer relevant. Sometimes this happens automatically after the next payment is not paid, and sometimes the contract continues to operate. Therefore, you should carefully study the expiring contract or ask your manager at the insurance company about it.
According to Lidia Efimova, “if the policy is not automatically terminated, then the client will need to write an application or notify the insurance company that he will not renew the policy.”
Recalculation of the cost of insurance in case of partial early repayment
The insurance rate depends on several factors. In the case of insurance of real estate, life and health of the borrower, the price is affected by: the amount of debt, the type and condition of the property, the age and gender of the insured.
In the event of early repayments on the loan, the client has the right, upon prolongation of the contract, to inform his insurer about the reduction in the balance of the debt, and he will recalculate the schedule of insurance premiums for subsequent periods (if a multi-year contract is concluded), explained Lidia Yefimova, Deputy Director of the Absolut Insurance Mortgage Insurance Department.According to her, if the contract is one-year, then the client annually reports the current loan balance on the date of prolongation, and it already takes into account early repayments for the past period. important point:
As for cases when borrowers decide after a while to return the money for their insurance, which was calculated for several years without taking into account partial early repayment of the mortgage, such a possibility is not provided for in standard contracts. Nevertheless, it is possible to return part of the premium, but for this, most likely, you will have to go to court or try to negotiate amicably with your insurance company.