Life Insurance Premium Refunds
RDT Abogados offer a service to assist clients who have taken out a mortgage with a Spanish bank and have a mandatory life insurance policy.
Why do I have a life insurance in my mortgage agreement?
The lenders (banks, usually) are entitled to request a life insure policy in the mortgage agreement.
The reason behind this is simple and quite understandable, if the borrower passes away the insurance policy will cover the outstanding mortgage debt.
This mortgage will then be paid off and thus the property unencumbered, so it can be included in the deceased´s estate and transferred to the beneficiaries of same.
In which cases can I ask them for a refund of the premium?
Even if the idea of life insurance to cover a mortgage debt is completely within reason, the banks (lenders in mortgage agreements) took it a step further by trying to squeeze more money from their clients: they requested that the premium for the entire length of the mortgage be paid in advance at the time the mortgage was signed.
Moreover, they didn´t explain this to their clients.
For instance, a client agrees a 20 year mortgage. Following the normal state of things as explained above, he will also sign (usually within the same mortgage deeds) a policy insuring his life so in the event of his death the mortgage will be paid.
This policy would mean monthly premiums while the mortgage is in place.
However, if the client pays the premium for the whole policy in advance there is the risk that he will be covered even if/when he no longer needs the insurance. i.e. if he sells the property before the mortgage term expires.
The fact that the banks do not tell the clients this information boarders on fraud.
And why can I ask for a refund of the premium?
We are aware that some banks, Banco Sabadell being the most prominent, charged clients the insurance premium for the entire term of the mortgage.
With a typical mortgage being 20 or 25 years, this could mean several thousand euros being added to the total debt amount over the life of the mortgage because the added cost of the insurance increased the monthly mortgage/loan payments.
This extra amount can be claimed back as it has been deemed illicit for the banks to sell and present insurance policies in this fashion.
Is it a costly process?
No, it need not be. RDT offer a free consultation for clients who believe they may have been subject to abusive life insurance premiums.
We review the mortgage agreement and determin whether the premium for the life insurance has been included and if the entire term was charged in advance.
There are several circumstances in which we can assist.
For example, you may have sold the property and not received a refund on the remaining insurance premium.
It is important to note that often the banks refuse to even enter into a discussion, or fob the client off, because the insurance company is usualy always an entity belonging to the same banking group.
If the banks refuses to settle the matter amicably, RDT can proceed to Court on a no-win no-fee basis, charging only a small percentage of the funds recovered, and only once these funds are recovered by the client. Alternatively we also offer a fixed fee service if that would be more appropriate for your needs.
Once I get a refund, what are my options?
Once the matter is clarified and you get the refund, you may wish to cancel the policy and take out separate life insurance cover if necessary.
The life insurance premiums charge by the banks are usually higher than those that RDT can arrange through independent insurers.
RDT can assist you with a replacement policy if required.
Please contact us today for a no-obligation consultation.