When refinancing a foreign currency mortgage in rubles, borrowers are required to reissue their mortgage insurance policy. The problem is that under the terms of the loan agreement, insurance must be in the same currency as the loan. In fact, for the bank, the refinancing process involves the issuance of a new loan. Therefore, a change in the insurance currency occurs by simultaneously terminating the insurance currency exchange agreement and concluding a new policy in rubles. For the insurance company, this is precisely the new policy, usually with substantially increased (relative to the initial contract) insurance amounts. And the whole process of concluding a contract will go from scratch. Consider some of the main problems that a client may encounter during this procedure.
Lack of accreditation of the insurer in the bank
If you are refinancing a foreign currency loan in another bank, please note that the list of accredited companies in all banks is different. And the new bank may not accept the insurance documentation of your company. Theoretically, it is possible to collect documents to include your insurance company in the list of bank partners, but in practice it is very difficult to implement. If the company is not included in the list of accredited companies, you will have to terminate the policy and look for a new insurer. Upon termination of the policy, a number of insurance companies may refuse to return part of the premium for an unexpired period, arguing this in Article 958 of the Civil Code of the Russian Federation, according to which, upon termination of the insurance contract at the initiative of the insured, the premium is not refundable.
You should carefully study the insurance documentation regarding the provisions on termination of the insurance contract. The insurance conditions of most companies upon termination of the insurance contract in connection with the early repayment of the loan provides for the return of part of the premium for an unexpired period minus the costs of the insurer to conduct business. Since in fact the loan refinancing process involves obtaining a ruble loan to repay a foreign currency, when applying for a policy termination, you must provide documentary evidence from the bank to repay a foreign currency loan. And you will have to return part of the previously paid bonus.
Determination of the insured amount and value of property insurance
According to Article 947 of the Civil Code of the Russian Federation, the insured amount for property insurance must not exceed the actual value of this property. Therefore, it is important for the parties to the contract to understand the real market value of the object – the insured, so as not to overpay when concluding the contract, but to the insurer when settling the loss.
Upon initial processing of a loan, the bank obliges the borrower to make a real estate appraisal report, which indicates the market value in rubles and in the currency of the loan. When refinancing a foreign currency loan in rubles at the discretion of the insurance company, the insurance amount may be set within the market value specified in the old valuation report. Most companies offer this option if the valuation report was prepared no more than three to five years ago (depending on the insurance company) and if the real market value can be checked using the insurance facility using the analog method via Internet sources. But in this case, it is likely that the insured amount will be lower than the loan amount issued by the bank upon refinancing, which does not comply with the terms of the loan agreement. If the bank is not satisfied with the insured amount, established on the basis of the old report, or if the insurance company does not have the opportunity to quickly assess the value of the property using the analog method (for example, expensive suburban residential buildings), it will be necessary to conduct a new assessment. At the discretion of the insurance company, the assessment can be carried out by experts of the company or independently ordered by the client in an independent assessment company.
Even if the market value of the property under the new valuation report does not cover the size of the loan obligations, in most cases there will be no problems with the bank. Since in this case you will have confirmation of the current market value, and, as mentioned earlier, insurance is impossible above this value. Theoretically, the bank may try to increase the cost, including by conducting an independent assessment, but in practice this is rare.
The need for a medical examination for life insurance
Despite the fact that the client has a valid insurance policy, when re-issuing the policy he can still be sent to undergo a medical examination for life and health insurance, even if it was not required during the initial registration of the policy. The need for a medical examination depends on the ratio of the age of the client and the size of the sum insured. If a client wants to refinance a large mortgage loan taken more than a year ago, it should be noted that the borrower’s age has increased, the insured amount in ruble terms has increased due to a sharp increase in the exchange rate. If the client does not have the time or opportunity to undergo a medical examination, the following ways out of the situation are possible.
The first is the registration of a currency change in the framework of the current contract.
In fact, the insurer carries increased risks under the current contract and its re-registration only fixes the amount in rubles. The bank and the insurance company may coordinate the execution of the change in the insurance currency not by issuing a new policy, but by concluding an additional agreement to the current one. With the help of an additional agreement, the schedule of insurance payments is changed and insurance amounts and premiums for future insurance periods in rubles are prescribed. This approach to re-issuing a policy is atypical; not all banks and insurance companies can agree to it.
The second way out is to transfer to another insurance company.
Requirements for medical examination in all companies are different. There is a possibility that the client will be able to choose for themselves an insurance company that will accept it for insurance without the results of a medical examination. With this solution, you must terminate the policy with the current insurer. At the same time, the process of terminating the policy and calculating the return of part of the premium are similar to those previously described. The insurer will incur the least expenses upon termination of the contract, as close as possible to the end of the next insurance period.
If the process of re-signing an insurance policy takes place within the framework of one insurance company, part of the insurance premium from the terminated policy is reloaded to a new one. In this case, to accurately calculate the amount of transfer, the following points must be taken into account:
– the insurance rules of many insurance companies contain a clause that, upon early termination / termination of the insurance policy, the insurance premium is returned at the official foreign exchange rate set at the date of payment of the insurance premium. Therefore, the amount of the transfer will be calculated on the basis of the actually paid premium in rubles, not dollars;
– if the client refinances the loan within the framework of one bank, then, as a rule, insurers calculate the return of the premium for the unused period of insurance without deducting business expenses. But if the bank changes, the calculation is carried out according to the procedure for terminating the insurance contract for early repayment of the loan, that is, withholding the expenses of the insurer;
– in most cases, the calculation of the paid and used insurance period occurs in days, not months. Moreover, the date of termination of the insurance policy is the last day of this period. That is, the exact amount of the bonus transfer can be calculated only when the date of the refinancing transaction at the bank is finally set.