When taking out a loan or a mortgage, almost every borrower is offered insurance. Some policies are mandatory by law, others are voluntary but affect the interest rate. Let's see where the line lies and what rights a borrower has.

What is mandatory by law

With a mortgage, only insurance of the mortgaged property against loss and damage is mandatory — a requirement of Federal Law No. 102-FZ "On Mortgage (Pledge of Real Estate)". If a car is pledged under a car loan, the bank as a rule requires KASKO (comprehensive motor insurance), but this is a contract condition rather than a direct legal requirement.

What is voluntary

  • life and health insurance of the borrower (in case of death or disability);
  • title insurance — the risk of losing ownership of the property;
  • job loss insurance and other financial risks.

Refusing voluntary insurance cannot be grounds for refusing a loan. But the bank may offer different terms: with insurance and without it. The bank must also offer a loan option without voluntary insurance; the rate on it is usually higher.

Can you choose your own insurance company?

Yes. Law No. 353-FZ "On Consumer Credit (Loans)" gives the borrower the right to take out insurance independently with an insurer that meets the bank's requirements. Banks publish these requirements and lists of accredited companies. A policy from the bank's "own" insurer is not mandatory: comparable terms can often be found cheaper on the market.

How to switch insurer on a mortgage

  1. Find out the bank's requirements for the insurance company and for the contract terms (risks, sum insured, beneficiary).
  2. Compare offers from several accredited companies — for example, with the mortgage insurance calculator.
  3. Take out a new policy before the old one expires or by the next renewal date.
  4. Submit the policy and proof of payment to the bank within the period set by the contract, otherwise the bank may raise the rate.

How to get your money back

The "cooling-off period"

Voluntary insurance of individuals has a "cooling-off period" of 14 calendar days from the date of the contract (Bank of Russia Directive No. 3854-U). If no insured events have occurred during this time, you can cancel the contract and get the premium back: in full if the contract has not yet started, or minus a portion for the days elapsed.

Early repayment of the loan

If the loan is fully repaid early and the insurance was taken out to secure it, the borrower is entitled to a refund of part of the premium in proportion to the remaining term, provided there were no insured events. This rule is set out in the consumer credit law. The application is submitted to the insurer; if the contract was concluded through the bank, you can also contact the bank.

If you are refused

Send a written claim letter. If you are not satisfied with the answer, contact the financial ombudsman — for disputes with financial organisations involving up to RUB 500,000 this is a free pre-trial step.

Consumer loan insurance

With an ordinary consumer loan, life and health insurance is always voluntary. Read the application carefully: the box agreeing to insurance must be ticked by you, and the cost of the service must be shown separately. If the insurance is included in the loan amount, interest is charged on it too.

How to choose borrower insurance

  • Sum insured. Usually equal to the outstanding debt, sometimes with a mark-up set by the bank. Check that it decreases along with the debt.
  • Risks. Death from any cause or only from an accident, which disability groups, temporary incapacity for work.
  • Exclusions. Pre-existing conditions known before the contract, dangerous sports, intoxication.
  • Payment procedure. The bank is the beneficiary for the amount of the debt; the remainder goes to the borrower or their heirs.
  • Price. Depends on age, gender, health, type of property and the insurer. The difference between companies can be significant.

A final tip

Borrower insurance is not just a bank requirement but real protection for the family: in the event of serious illness or the borrower's death, the debt is repaid by the insurer, not by relatives. So it is important to choose not the cheapest policy, but one with suitable terms. Look at life insurance and apartment insurance options, and leave the selection to meet your bank's requirements to Polis Re specialists via a request.