How to terminate an insurance contract

How to terminate an insurance contract

“Is it possible to return money for insurance?” Is probably the most common question asked by customers who want to terminate the insurance contract. We will talk about in which cases you can return money for insurance, and in which the law is on the side of the insurer.

Legislation

According to Art. 958 of the Civil Code of the Russian Federation, the policyholder has the right to refund part of the paid insurance premium in proportion to the unused period if the possibility of an insured event has disappeared or the existence of the insurance risk has ceased due to circumstances other than the insured event. In particular, such cases include the total loss of the insured property for reasons other than the insured event, and the liquidation of the insurer in the manner prescribed by law.

This article of the Civil Code of the Russian Federation also provides for the possibility of early termination of the insurance contract at the initiative of the insured. In this case, the paid insurance premium is not refundable, unless otherwise provided by the insurance contract.

The indicated rules for termination of insurance contracts are fundamental, unless other conditions are spelled out in the insurance rules or in regulatory legal acts regulating the termination rules for certain types of insurance.

Cooling period

The cooling period was introduced by Bank of Russia Ordinance No. 3854-U dated November 20, 2015 as a result of a large number of complaints from citizens about “imposing” additional policies when compiling a mandatory motor third-party liability insurance or obtaining a loan.

The cooling period is understood as a period of five working days from the date of conclusion of the contract, during which the policyholder (individual) can terminate the insurance contract on his own initiative with minimal financial loss or no loss at all, provided there are no insurance events in the specified period. According to the instruction, if the policyholder withdraws from the contract within five days from the date of conclusion until the start of the insurance, the insurance premium paid must be returned in full. If the termination occurs during the cooling period, but after the start of the insurance, the insurer has the right to withhold part of the insurance premium paid in proportion to the period during which the insurance was valid. A five-day period is minimal, and at the discretion of the insurance company it can be increased, what should be recorded in the Insurance Rules. Refunds must be made within a period not exceeding 10 business days from the date of receipt of a written application for cancellation of the contract.

The list of insurance types covered by the requirement for a cooling period is clearly limited. These types of insurance include: accumulative insurance, investment insurance, pension insurance, accident and sickness insurance, voluntary medical insurance (except for VHI for migrants), comprehensive insurance, property insurance, civil liability insurance of vehicle owners, water carriers, for causing harm third parties and financial risk insurance.

How to take advantage of the cooling period

The application must be written in free form to the insurance company. It is impossible to unequivocally answer the question of where to submit the application – to the bank branch or to the office of the insurance company, since an agent agreement may be concluded between the bank and the insurer that does not extend the authority for the agent to accept such applications. It is better to write a statement directly at the insurer’s office. If there is no representative office of the insurance company in your region, the application for termination and account details must be sent by registered letter with a notification and a description of the investment to the address of the insurer’s head office. In this case, the date of the insurer’s refusal from the insurance contract will be not the date of receipt of the application by the insurer, but the date of sending the letter.

Many users of the Banki.ru portal leave information that upon termination, the insurance company requires that a policy form be attached to the application . The exact list of documents that must be attached to the application for termination is not regulated in the instruction of the Central Bank of the Russian Federation. If the list of documents is also not defined in the insurance rules, then it is enough to submit one application, which should contain information about the insured, the number and date of the terminated insurance contract. If the list of documents is clearly specified and requires the application of the original policy, but you do not have it, you can simultaneously with the application for termination apply for a duplicate policy.

Termination of insurance policies issued upon receipt of a loan

Most often, questions about termination of the insurance contract and repayment of funds arise precisely on life insurance, issued at the conclusion of the loan.

To determine the possibility of returning part of the paid insurance premium, the first thing you should pay attention to is the type of conclusion of the contract. The bank can issue you both an individual insurance policy and a connection to a collective insurance program. Joining a collective insurance program means that a contract has been concluded between the bank and the insurance company for life and health insurance of the bank’s borrowers and the bank adds you to this agreement as the insured. Moreover, in the loan agreement, most of the insurance payment will not be a payment of the insurance premium, but a fee to the bank for connecting to the insurance program. In this case, you cannot use the cooling period and terminate the contract within five days.

You can refuse insurance and return part of the money only if it is expressly provided for in the rules. Some banks provide for a certain period during which you can refuse insurance with a full refund. But most often, if the rules provide for the possibility of refusing insurance, payment for insurance services is not refunded in full, but in proportion to the unused period minus the bank commission, which in some banks reaches 90%. Even in cases when the bank returns the paid commission, it can withhold personal income tax from this amount. According to the explanation of the Ministry of Finance (letter No. 03-04-05 / 57984 dated November 17, 2014), the amount paid for connection to the insurance contract is a fee for the service provided. In case of cancellation of insurance, the bank actually transfers to the client the amount

If, upon conclusion of a loan agreement, you have been issued an individual insurance policy, according to which you act both as the insured and the insured, then you can use the cooling period. Moreover, the main thing is to have time to write an application for cancellation of the insurance contract within five working days from the date of its conclusion, regardless of the time the insurance premium is paid. If more than five days have passed since the conclusion of the insurance contract, it is possible to terminate the insurance contract with the refund of part of the premium paid only if it is provided for by the insurance documentation.

The same rule applies to the termination of the contract for early repayment of the loan. The possibility of termination with the return of a part of the premium upon early repayment of the loan is connected, inter alia, with the procedure for determining the amount of the insurance amount in the contract. If there is a clear link to the size of the balance of the debt, there is a chance to terminate with the return of the premium, but, most likely, it will have to be proved in court. If the insured amount is set in the amount of loan debt at the beginning of the insurance period and remains unchanged throughout the insurance period, it is most likely that it will not be possible to return part of the insurance premium in proportion to the unused period if it is not proved that the contract was imposed. It is very difficult to do this.

Termination of voluntary insurance contracts

Upon termination of the voluntary insurance contract, from the date of registration of which more than five working days have passed, it is necessary to follow the insurance rules. Many insurers prescribe a condition according to which, upon termination of the contract, the client can return part of the paid insurance premium in proportion to the unused period minus the costs of doing business. Moreover, these costs may be 25-90%. Also, insurance policies often contain formulations that imply a deduction from the amount due after termination of the amount of payments made. If the insurance documentation does not contain such a provision, the paid insurance premium is not refunded.

In the event of termination of the accumulative or investment insurance contract, the policyholder may regain part of the funds spent on insurance. In fact, this is not a refund of the insurance premium, but the amount of the formed insurance reserve on the day of termination of the insurance contract (redemption amount). The redemption amount is established at the time of conclusion of the insurance contract and must be indicated in the insurance documentation. As a rule, in the first years of insurance, the amount of the redemption amount is very low and only towards the end of insurance is approaching the size of the insurance premium.

In compulsory types of insurance, the termination procedure is formulated in the law or by-laws. For example, OSAGO clearly outlines cases in which the contract can be terminated or terminates (for example: change of ownership or death of the vehicle), and the procedure for calculating the amount of premium return – in proportion to the expired policy period based on the share of the premium intended for implementation insurance payments, that is, initially deducted 23%.

With the introduction of the cooling period, it became easier for consumers to refuse insurance and return the paid insurance premium, but still there are many subtleties and nuances in this matter. 

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