Expensive traps: Why you don’t need residual debt insurance for loans!

Expensive traps: Why you don’t need residual debt insurance for loans!

Experts are increasingly warning about the pitfalls of residual debt insurance that is often offered in connection with car loans. This insurance is intended to cover the loan installments in the event of unemployment, illness or death of the borrower. But consumer advocates criticize both the high costs and the poor performance of these products. They demand a critical examination of the necessity and benefits of such insurance. Ruhr24 reports that in an example of a car loan for 18,000 euros and a term of 8 years, the monthly rate without residual debt insurance would be 256.13 euros. However, with the insurance it would increase to 330.46 euros, which increases the total cost of the loan from 6,588.33 euros to 13,724.16 euros.

Consumers therefore pay more than 7,000 euros more and the effective annual interest rate doubles from 8.49% to 16.89%. These extreme costs mean that more and more voices are being raised that point out the unfairness and unhelpful aspects of residual debt insurance.

Criticisms and alternatives

The five main problems with residual debt insurance illustrate why this type of insurance is not only expensive but also not very effective:

• Versteckte Kosten: Die Prämie wird häufig in den Kredit integriert, was zusätzliche Zinsen auf die Versicherungskosten zur Folge hat.
• Ausschlüsse: Viele Ereignisse sind nicht abgedeckt, da es oftmals Wartezeiten und spezielle Klauseln gibt, die eine Leistung der Versicherung entwerten.
• Kredite sind in den meisten Fällen bereits durch andere Versicherungen wie Arbeitslosenversicherung oder Lohnfortzahlung abgesichert.
• Bessere Alternativen existieren: Risikolebens- und Berufsunfähigkeitsversicherungen sind in der Regel kostengünstiger und bieten eine umfassendere Absicherung.
• Hoher Druck auf Verbraucher: Viele Banken, Sparkassen und Online-Kreditportale bieten Restschuldversicherungen an, was zu einem erhöhten Verkaufsdruck führt.

In addition, borrowers often do not receive sufficient advice from intermediaries, who are often not qualified insurance experts. Even with online loan requests, residual debt insurance can be offered, even if no loan agreement is concluded.

Legal information and withdrawal options

The legal situation regarding revocation and termination of residual debt insurance is clear. A revocation is possible without any problem within 14 days of taking out the insurance, or within 30 days for death insurance. Cancellation can also take place later, whereby part of the premium paid can be refunded. Consumer advocates recommend always sending cancellations and revocations by registered mail in order to have confirmation. The consumer advice center emphasizes that from January 2nd, 2025, residual debt insurance may only be taken out one week after the loan contract has been concluded.

A thorough examination of existing insurance before taking out residual debt insurance is strongly recommended, as many borrowers are already adequately protected by legal protection. Given the high costs and limited benefits, residual debt insurance appears to offer more disadvantages than advantages for borrowers.