Car loan insurance

Car loan insurance

Sales of new cars in 2015 decreased significantly. To increase sales, car dealers resort to various marketing campaigns, including those related to attractive car loan conditions. When deciding on a loan, you need to remember that any loan in our time is closely related to insurance services.

Therefore, it is important to correctly assess the overall financial costs of buying a car and try to reduce them. To do this is sometimes problematic, since the issuance of a loan at the rate indicated in the advertising proposal may be due to the acquisition of several types of insurance. Consider what types of insurance are offered when applying for a car loan.

1. Car insurance

The main type of insurance, the contract for which is concluded when applying for a car loan, is comprehensive insurance. According to Article 343 of the Civil Code of the Russian Federation, mortgaged property must be insured at the expense of the mortgagor against the risks of loss and damage. At the time of the loan, the car is usually issued as a pledge, and hull insurance is mandatory, unless otherwise provided by the contract. Some banks provide for the possibility of obtaining a car loan without hull insurance, but the interest on the loan grows by 3-5%. It is proposed to pay for the policy using your own funds, and the cost of insurance may also be included in the body of the loan. How to approach the choice of Casco, wrote earlier. But when obtaining a loan it is important to comply with the requirements of the bank: for example, on the possibility of applying and the allowable amount of deductibles, the list of risks and permissible exceptions. Due to the recently increased cost of hull insurance, bank requirements have softened. Almost all banks accept franchise policies, which were not often seen before.

A full range of lending and insurance services today is almost always provided directly by a car dealer. An unambiguous plus of this design is the knowledge by the dealer employee of all the nuances of insurance requirements of banks. Minus – focus on concluding an agreement with insurers offering dealers the most favorable conditions for cooperation. Due to special joint programs, the cost of insurance at the dealership can be even lower than at the office of the insurer or other intermediaries.

When applying for a car loan directly at Casco Bank, you can arrange it at the office of any insurance company accredited by this credit institution. Theoretically, a bank can accept an insurer policy that is not on the list. But for this, it is necessary to submit constituent and financial documents of the insurance organization for verification to the bank, which can be time-consuming and have unpredictable results.

The policy is usually concluded for one year with further extension. It is better to avoid proposals to conclude an agreement for the entire loan term, mainly because of the conditions of payment in cases of death and theft of the car. In various forums, there is an opinion that it is possible to issue a policy for only one year in order to reduce the interest on the loan, and in the future not to renew it. It all depends on the organization of the bank’s work, since a loan agreement usually sets out the obligation to provide a new paid policy, the failure of which entails its early termination or a significant change in the interest rate.

It is advisable to conclude an MTPL agreement with an insurer selected for comprehensive insurance. The fact is that the insurer can provide an additional discount on voluntary insurance, and if it is necessary to amend the terms of the contract (for example, the list of drivers), it can be done much faster for one insurer.

2. GAP insurance

GAP insurance (guaranteed asset protection) guarantees compensation in the amount of the difference between the initial (insurance) value of the car and its value, taking into account “depreciation” at the time of the insured event. This type of insurance is purchased exclusively with a comprehensive insurance policy and is valid only in the event of the death or theft of a vehicle. Since loans are not actually issued without an initial installment, such a requirement is not very common, and the cost of this service is not very high, so there are few cases of imposing and refusing it. When deciding on this type of insurance, it’s worth considering that according to paragraph 5 of Article 10 of the Law “On the Organization of the Insurance Case”, the beneficiary may receive a payment in the amount of the full insurance amount in case of loss or loss of property. To avoid such a payment, insurers introduce wording in the rules that reduce the insurance amount during the operation of the car.

The jurisprudence in such cases varies, it depends heavily on the wording used. And if it is important to guarantee the value of the car at the time of purchase, you should think about such coverage. For the second and subsequent years of insurance, such a policy can allow you to insure a car up to the purchase price of a similar new one.

3. Accident and sickness insurance

Insurance upon accidents and diseases when applying for a car loan causes the most complaints. As practice shows, basically it is included in the loan agreement by default, arguing that the bank will not approve a loan without insurance, and such insurance can be very expensive. The presence of insurance in no way should affect the decision-making process on the part of the bank, but the bank has the right to refuse to grant a loan “without explanation”. It is impossible to link the refusal to issue a loan with the refusal of insurance and to challenge the refusal.

Often the bank is silent about the availability of such insurance. Insurance often covers the entire loan term and is included in the loan body. That is, in fact, the client acquires insurance on credit, which also accrues interest. It is most often impossible to terminate this insurance with a refund of the insurance premium due to referral to paragraph 3 of Article 958 of the Civil Code of the Russian Federation, despite the assurance of credit managers. Unfortunately, as practice shows, credit managers cannot be taken for a word. If you are told that the insurance premium can be returned by submitting a termination application to the insurance company, including for early repayment of the loan, ask to show the appropriate item in the insurance documentation.

If you saw insurance information after signing all insurance documentation, you should carefully study it for termination provisions. If the documentation refers to insurance rules, it is always posted on the insurer’s website. Some insurance companies provide for a grace period during which the client can terminate the insurance contract with a full refund of the insurance premium. If in your case a grace period is not provided, and the presence of insurance categorically does not suit you, you need to try to return its cost.

The wording of the contracts may provide for this various options. In specialized forums , cases of full insurance premium repayment are described when applying for cancellation of the insurance contract on the day the loan contract is concluded. The Bank does not have time to transfer the insurance premium to the insurer, and the insured, referring to the clause of the rules that stipulates that the contract does not enter into force before the insurance premium is paid, has refused the contract that has not entered into force. For this, it is necessary to submit a corresponding application to the insurer, fixing the date and time. But it’s better to pre-read the loan documentation and not bring to a similar situation, since in most cases it is unlikely to return the premium.

The second option offered by banks is that, depending on the presence or absence of an accident insurance policy, the interest rate on the loan changes. This option seems more honest, as it gives the borrower the opportunity to evaluate their costs in each case. In any case, no matter how the inclusion of such a service looks, it is important to realize that this is an insurance contract and reduces certain risks.

4. Job loss insurance

The type of insurance, which was not so long ago actively offered when lending, but due to the not very favorable economic situation in the country, is almost not found today. When insuring against loss of work, the insurer undertakes to cover part of insurance payments in the event that the borrower loses his job for reasons beyond his control: reduction, liquidation of the organization, etc. The full list of cases of loss of source of income recognized as insurance is specified in the insurance rules. But no insurance company covers the dismissal of their own free will or by agreement of the parties. The insurance program almost always provides for a temporary deductible for several months after the dismissal, during which the indemnity is not paid. One of the mandatory requirements is registration with the employment service and being registered throughout the entire period of the temporary deductible and the subsequent period of absence of official work. Inclusion of such insurance in the contract is carried out according to a scheme similar to accident insurance. And the problems may be similar.

When deciding on a loan, all insurance expenses should be taken into account, since they can be significant amounts, especially for those that are risky in terms of car insurance, for which only the hull rate can exceed 10% even for experienced drivers.

The conclusion of any other insurance contracts as part of a loan relationship should be entirely voluntary, and the loan documentation should provide for the possibility of obtaining a loan with or without insurance. If there is no choice, this may be considered a violation of article 16, paragraph 2, of the Consumer Protection Law. In case of early termination of the contract to return the excessively paid insurance premium is very problematic, including in case of early repayment of the loan.

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