Even if a mortgage is cancelled, a refund of Life Insurance paid may be possible

Law of Horizontal Property

IF your mortgage loan has been cancelled, even if it was for the shortfall in payment of interest, you may be able to claim a part refund of any life insurance premium paid which was linked to your mortgage.

In the past, many Spanish banks forced their client to enter into a life insurance agreement with the premium paid in advance, in order to cover payment of the mortgage loan, either as a condition of the mortgage loan or for clients to get obtain a ‘better’ deal. As previously reported, it is possible to nullify the imposition of paying life insurance in some cases, and our law firm can help you.

In today’s article, we want to inform consumers and clients of banks in Spain, that if they took out life insurance with their bank and paid the premium in advance and at the start of the mortgage loan if the loan has been cancelled for any reason (even lack of payment), it is very possible that they could recover part of the premium paid although unfortunately, banks do not normally inform their customers of this possibility. In legal terms, it is logical, that if you pay an amount of money for life insurance to cover you for a certain period of time if the loan is cancelled, the premium that you have paid in advance has not been consumed in its entirety, since for part of the length of the loan, you will not have the insurance coverage, since the loan has been cancelled early.

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Many banks argue that this possibility of claiming for the proportional refund of the life insurance premium linked to the mortgage, in the event of an early cancellation, is only possible when the loan is paid in advance, but not when the loan is terminated for lack of the client’s payment, but they are wrong. As stated by the Provincial Court of Barcelona in the decision 724/2018, it must be understood that the insured has the right to be returned the proportional part of the corresponding insurance premium in the event of early cancellation of the loan. This is the case if the loan ends due to non-payment of the instalments unless it is specified in the insurance contract that in case of non-payment the client would not be entitled to such refund.

Even if that was the case, denying this possibility would be an abusive clause, since an insurer can not pretend to stop the coverage without allowing the insured to recover the part of the premium for the time where the insurance coverage is not in place, independently of the reason of the cancellation of the mortgage. Therefore, if you signed a life insurance to guarantee the payment of your mortgage, you paid it in advance, and if your loan has been cancelled early, for whatever reason, contact our law firm ( http://www.white-baos.com) to claim a refund of the proportional part of the premium paid. The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues


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