Life and health insurance is often taken out together with a loan — sometimes voluntarily, sometimes because it lowers the interest rate. The law allows you to cancel it and get your money back, but the amount refunded depends on when and on what grounds you do so. Let us go through it step by step.
Three grounds for a refund
| Ground | Deadline | How much is refunded |
|---|---|---|
| Cancelling insurance that secures a loan (Art. 7 and Part 11 of Art. 11 of Law No. 353-FZ) | 30 calendar days | The whole premium |
| Cooling-off period for voluntary insurance (Bank of Russia Directive No. 3854-U) | 14 calendar days | The whole premium if cover has not yet started; otherwise minus the days elapsed |
| Full early repayment of the loan (Parts 10 and 12 of Art. 11 of Law No. 353-FZ) | At any time after repayment | Part of the premium for the unexpired term |
In all cases the money is refunded only if there have been no events with the features of an insured event.
30 days to cancel: the consumer credit law
Federal Law No. 353-FZ "On Consumer Credit (Loans)" gives a borrower 30 calendar days to cancel insurance taken out to secure a loan. This is the case if the loan terms — rate, term, amount — depend on having the insurance, or if the bank is the beneficiary under the policy and the sum insured is linked to the outstanding debt.
If you are insured under the bank's group contract
The bank itself is the policyholder and you are enrolled in its programme. In that case the application to be removed from the list of insured persons is filed with the bank, which must refund all money paid for enrolment, including the premium, within seven working days. The bank must state in the loan application the cost of the insurance and your right to cancel within 30 days, and no later than the day after issuing the loan it must send you a notice of the additional services and the deadlines for cancelling them.
If the contract was concluded in your own name
The cancellation application is filed with the insurer. The premium is refunded in full within seven working days of receipt of the written application.
The 14-day cooling-off period
For voluntary insurance of individuals not related to a loan, the cooling-off period under Bank of Russia Directive No. 3854-U applies — at least 14 calendar days from the date of the contract. The insurer may set a longer period. If you cancel before the cover starts, the premium is refunded in full; if after, minus the part for the days elapsed. This rule does not apply to compulsory insurance such as OSAGO.
Refund on early repayment
If you have repaid the loan in full ahead of schedule, you can get back part of the premium for the remaining insurance period. This applies to insurance taken out to secure the loan:
- under a group contract — the application is filed with the bank, which refunds the premium minus the part proportional to the time you were insured;
- under an individual contract — the application is filed with the insurer, and the calculation is the same.
The refund deadline is no more than seven working days from receipt of the application. The alternative is to keep the policy until the end of its term: after repayment, you or your heirs become the beneficiary. This makes sense if you still need the cover.
Mortgage specifics
- Insurance of the collateral is mandatory. Under Article 31 of Law No. 102-FZ "On Mortgage", a mortgaged flat or house must be insured against loss and damage. You cannot cancel this policy without consequences, and the 30-day rule does not apply to such contracts.
- Life and title insurance are voluntary. The rules on 30-day cancellation and on refunds after early repayment also apply to loans secured by real estate.
- The rate may go up. If the loan agreement provides for insurance and you cancelled it and did not take out new cover within 30 days, the bank may raise the rate — but not above the rate it applied at the time of issue to comparable loans without insurance.
- You can change insurer. If you have taken out insurance yourself with a company that meets the bank's requirements, the loan must be provided on the same terms. How to use this at annual renewal is explained in "Mortgage insurance: how to save at renewal".
How to file the application
- Find out who the policyholder is: you or the bank. This is stated in the policy or in the enrolment application.
- Write an application to cancel (or to be removed from the list of insured persons) — to the bank or to the insurer respectively.
- Attach a copy of your passport, the policy or certificate, proof of payment and bank details; for early repayment, a certificate that the loan has been closed.
- Send the application in a way that lets you prove the date: via your personal account, in person with an acknowledgement of receipt, or by registered letter with a list of enclosures.
- If there is no response within seven working days or the refund is refused, send a claim and then apply to the financial ombudsman (procedure).
Tips before cancelling
- Compare the saving on the premium with the higher interest: sometimes the insurance costs less than the difference in interest.
- If you need the cover, choose a policy from another company that meets the bank's requirements, and only then cancel the old one.
- Watch the deadlines: the 30 days are counted in calendar days from the date of the contract or enrolment.
Polis Re specialists will help you choose life insurance or mortgage insurance on your bank's terms.