Life insurance clauses contracted with financial institutions

For years, financial institutions have obliged those interested  in mortgage loans, to take out a life insurance policy with the insurer of these institutions, without giving a choice of price, payment instalments or insurance company, and even putting themselves as beneficiaries.

Although it may be interesting to take out a life insurance policy with the insurance company offered by the lending bank, it will probably mean a saving that will be paid to the financial entity and, perhaps, with a policy that is not as complete or well adapted to the user’s needs.

The borrower must always be correctly informed of the conditions of the insurance and be free to contract or not, being able to disassociate themselves from that offer and look for another without losing the concession of the loan.  However, the problem that has arisen in recent years is that the insurance has been imposed by the financial institution as an essential condition for granting the mortgage loan, and has forced it to be a single premium. And this has not only happened in mortgage loans, but also in other types of loans that have imposed this clause.

What is a single premium insurance?
– The lender has imposed the insurance as a condition for obtaining the loan.
– The lender has imposed the insurer and the conditions of the insurance, without the possibility of modification.
– It is an insurance that has been paid in a single payment at the time of taking out the mortgage, i.e. it has been paid in advance.
– The insurance must remain in force throughout the life of the loan, being tied to this insurance for the years of payment of the loan.

What are the keys to finding out if we are in a situation of compulsory single premium life insurance?
The keys to find out if you are in this situation and can claim are as follows:

– The loan was taken out with a financial entity (bank, rural savings bank).
– The financial entity imposed life insurance as a condition for obtaining the loan.
– The consumer and borrower paid the life insurance in a single payment in advance, the amount of which ranged from 5,000 to 30,000 euros.
– The financial institution did not allow the consumer to take out other insurance on his behalf, and did not inform him of the conditions of the insurance.
– The premium paid was deducted from the amount received.
– No health questionnaire was carried out, or only a declaration of not suffering from any illness was filled in.

What do the Spanish Courts say?
The majority of Spanish Courts have condemned financial institutions to return the insurance premium.

𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐏𝐫𝐨𝐯𝐢𝐧𝐜𝐢𝐚𝐥 𝐂𝐨𝐮𝐫𝐭 𝐨𝐟 𝐉𝐚𝐞́𝐧 𝟖𝟎𝟔/𝟐𝟎𝟏𝟕, 𝟏𝟑 𝐃𝐞𝐜𝐞𝐦𝐛𝐞𝐫 𝟐𝟎𝟏𝟕

“This practice, of imposing insurance on the borrower, is nevertheless not unlawful, and is expressly regulated in Article 12. 4 of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements concluded with consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 which indicates that Member States may allow creditors to require the consumer to take out a relevant insurance policy in connection with the credit agreement.
[…] (But) we must declare that while it is not unlawful to impose an insurance contract on the borrower to guarantee the repayment of a mortgage loan, it is unlawful to impose insurance with a particular insurer”.

𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐏𝐫𝐨𝐯𝐢𝐧𝐜𝐢𝐚𝐥 𝐂𝐨𝐮𝐫𝐭 𝐨𝐟 𝐋𝐞𝐨́𝐧 𝟑𝟏𝟒/𝟐𝟎𝟏𝟓, 𝟏𝟔 𝐃𝐞𝐜𝐞𝐦𝐛𝐞𝐫 𝟐𝟎𝟏𝟓

“In order not to extend the argument too far, we will limit ourselves to indicating that if the insurance intermediary operates through the branches of the lender, it must assume the obligations inherent to the marketing of the product, and even more so if the insurer belongs to its own business group. There is no evidence – not even remotely – that the client had been offered the possibility of taking out an insurance policy with an annually renewable temporary premium, nor that he had been offered relevant information such as the criteria for calculating the surrender value or, of course, the high cost of the payment of the single premium, which, in addition, had to be financed. And all this with the primary purpose of protecting the payment to the beneficiary of the insurance contract.
[…] For all the above reasons, the clause is clearly abusive and must be expelled from the contract. The unfairness of the contract entails the nullity of the clause, and the effects of the nullity are the reciprocal restitution of benefits (article 1303 of the Civil Code)”.

𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐏𝐫𝐨𝐯𝐢𝐧𝐜𝐢𝐚𝐥 𝐂𝐨𝐮𝐫𝐭 𝐨𝐟 𝐌𝐚́𝐥𝐚𝐠𝐚 𝟗𝟔𝟔/𝟐𝟎𝟐𝟎, 𝟏𝟔 𝐎𝐜𝐭𝐨𝐛𝐞𝐫 𝟐𝟎𝟐𝟎

“Consequently, we must confirm the abusivity of the payment of this premium. Even if it is not a general condition, we must remember that unfairness is not only applicable to them, but to all those stipulations not individually negotiated and all those practices not expressly consented to which, contrary to the requirements of good faith, cause, to the detriment of the consumer and user, a significant imbalance in the rights and obligations of the parties arising from the contract (art. 82 TRLGDCU), and the imposition in a loan contract of the payment of an insurance premium is so when it occurs in the circumstances we have seen.”

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