Customers under pressure: residual debt insurance is often unnecessary!

Customers under pressure: residual debt insurance is often unnecessary!

From January 2, 2025, new regulations for residual debt insurance contracts will apply. Loud in Franconia In the future, one week must pass after signing the loan agreement before the insurance contract can be concluded. This change is part of a legislative initiative aimed at better protecting consumers. Section 7a Paragraph 5 of the Insurance Contract Act (VVG) clearly states that the insurer may only enter into the contract after this period.

Former Federal Consumer Protection Minister Steffi Lemke criticized the fact that residual debt insurance is often offered as a package with loans, which puts many consumers in an unpleasant position. BaFin's last market survey showed that over 6% of testers felt pressured to take out such insurance. The Association of Insured Persons (BdV) speaks out against residual debt insurance because it is considered overpriced and inadequate.

Criticism of residual debt insurance

Residual debt insurance is often viewed as worthy of criticism, not only in Germany but also in the United Kingdom. Numerous borrowers there have successfully reclaimed premiums amounting to around 33 billion euros. A study by the market watchdog at the Hamburg Consumer Center shows that over 50% of providers terminate residual debt insurance prematurely. This increases the justification for criticism of the often non-transparent contractual conditions.

Since the introduction of the European Directive on Insurance Operations (IDD), banks have been obliged to provide more transparent information about the costs and conditions of residual debt insurance. The banking association has even published a list of points to support this demand. Despite these measures, residual debt insurance remains a voluntary additional insurance that is not a prerequisite for receiving a loan.

Alternative options and termination options

Instead, the BdV recommends considering needs-based term life insurance or occupational disability insurance, which takes effect in the event of unemployment or inability to work. Many consumers already have legal protections that can help in such cases. However, unemployment insurance, which is mandatory for employed workers, leaves out the self-employed, pensioners and civil servants.

Consumers who want to cancel residual debt insurance must observe various deadlines and termination points. A cancellation should be made within 14 days and, in the event of death, can take place up to 30 days after conclusion of the contract. For contracts concluded between 2018 and the end of 2024, a new cancellation policy is required. This obligation will no longer apply from January 2, 2025.

It is advisable to send a registered letter for termination or revocation. If problems arise with the insurance, consumers can contact an ombudsperson to mediate. Loud Gansel Lawyers The costs of residual debt insurance vary greatly and can significantly increase the overall loan costs.