What happens with the insurance in the event of early repayment of the loan? It is also possible and necessary to close all insurance coverage by requesting reimbursement of the policy.
A loan agreement is frequently accompanied by the stipulation of an insurance contract, the policy of which provides for a premium paid in advance. In the event that the loan is terminated early , however, the risk of arrears vanishes and the terms of the contract may change.
The reimbursement of the insurance premium , in fact, is more than legitimate in the event of early repayment of the loan. It must be said, however, that a policy on a loan cannot be considered as a deposit paid to a hotel.
The unused premium must be calculated according to the rules imposed by the Banking Arbitration . The right to reimbursement is in any case ensured by the Consolidated Banking Act , as well as by the regulations applied by Isvap , but a specific formula will determine the amount.
The reimbursement process of the insurance premium is therefore the result of a standard procedure . Let's try to clarify some passages.
Mortgage and insurance: the risk of arrears is a cost
The mortgage is a form of long-term financing that can be entered into between a customer and a credit institution . The customer will pay a monthly sum for a specific period of time and certainly the lending institution will assess the risk of having the installments not paid.
For this reason, many banks accompany the stipulation of the loan with an insurance policy , which in any case guarantees a refund in case of default. The premium will have a variable amount depending on the value of the risk detected by the insurance company.
In addition to the mortgage installments, therefore, the customer must pay the insurance policy premium , usually requested in advance of the payment of the installments, in a single solution.
What are mortgage insurance
Mortgage insurances are compulsory or optional insurance policies , which protect banks and financed individuals during the repayment term of the mortgage loan.
The mortgage policy is therefore linked to the loan taken out for the purchase of a property and the natural expiry of the insurance is linked to that of the loan. However, in the event of early repayment of the loan, it is also necessary to close all insurance coverage, requesting reimbursement of the insurance premium.
The calculation of the compensation amount
According to the Consolidated Banking Act , included in the Decree 141/2010, the holder of a mortgage can proceed at any time to the extinction of his debt , whether it is carried out in part or for the whole amount. It follows from this that insurance companies must also provide for measures in this regard.
The return methods must be indicated in detail in the insurance contract, as required by art. 49, paragraph 3 of Isvap Regulation 35/2010 .
Even in the event of partial repayment of the loan, it is possible to request the reimbursement of a part of the insurance premium, by reducing the insurance on the mortgage.
In fact, the decrease in the insured value entails a lower exposure to risk, with the consequent reduction of the insurance premium which will be calculated accordingly.
The Supervisory Institute of Insurance Companies ( Isvap ) therefore provided that part of the insurance premium must be returned to the insured, also establishing the method of calculation for the compensation.
In particular, the repayment of the loan will lead to a ratio between the premium paid by the debtor, divided by the number of total installments of the loan, multiplied by the number of residual installments .
How to request a refund
The request for termination of the loan policy for early repayment of the loan should be submitted directly to the bank or insurance company with which the insurance contract is in place.
The application can be sent by registered letter with return receipt , attaching all the documentation required by the insurance company.
As provided by the IVASS, insurance companies and banks should take action independently to return the unused portion of the insurance premium, however this does not always happen so it is good practice to make a written request .
Furthermore, it must be remembered that the insured has the right to keep the insurance coverage active, obviously by renegotiating the terms of the contract .
Right to reimbursement: agreement between Abi and Ania
The right to reimbursement finds its origins in the agreement between Abi (Italian Banking Association) and Ania (National Association of Insurance Companies) of 2008, which commits the Bank to return to the customer the part of the insurance premium relating to the residual period of the loan. .
The question subsequently finds a specific discipline. In fact, with the legislative decree 179/2012 art. 22, co 15 quater, converted into law 221/2012, provides that:
in insurance contracts related to mortgages and other loan contracts, for which a single premium has been paid, the cost of which is borne by the debtor / policyholder, the companies, in the event of early repayment or transfer of the loan or loan, return to the debtor / insured the part of the premium paid relating to the residual period with respect to the original maturity, calculated for the pure premium according to the years and the fraction of years missing from the maturity of the coverage as well as the residual insured capital.
To overcome any reluctance to grant reimbursement , we remind you that it is always possible to contact the Financial Banking Arbitrator , or the Consumer Protection service at IVASS.
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