. . and equity financing with life insurance
Life insurances for the redemption of construction financing – The combination of different financial products (construction loan, life insurance, real estate loan, building society savings contract etc.) promises the investor an additional income through possible interest rate differences or tax savings, and at the same time additional provisions for the broker. However, it is not uncommon that the money saved in a second contract (e.g. life insurance for loan repayment) is ultimately not sufficient to pay off the debt completely. Then the question arises of the responsibility of credit institutions, insurance companies and their advisors or intermediaries?
Banks and advisors are liable for excessive costs by combining with a fixed loan – As a rule, it is cheaper for the customer to repay from the beginning. The contracting parties are liable for compensation for the unnecessary additional costs incurred when advising on the combination of additional repayment suspension products with the fixed loan. For banks, these combination models are a fine thing, because the customer pays higher fixed loan interest rates over the entire term – unlike with an annuity loan At the same time, product providers of repayment suspension products often offer banks more favorable refinancing conditions for the loans in question Practice shows, that the combination with a so-called repayment vehicle alone can extend the usual term for the total repayment of 15 years to about 25 years – with the same total monthly burden on the customer – if the yields of the repayment suspension product are not significantly higher than the loan interest rates charged. This makes banks and their advisors liable for their advice. They must later compensate the customer for the unnecessary additional expense.
Banks and insurers are liable for so-called undercoverage of the repayment vehicle – insurers have repeatedly been sentenced to pay damages because of “incorrect non-binding forecast calculations” In addition, insurers must also be liable for “spared promises and reassurance pills about alleged repayment security” within the scope of vicarious liability: This is because insurers are liable for inaccuracies regarding the content and meaning of the insurance conditions, even if the false information was provided by a bank employee or other intermediary. The mere indication of a “yield” for a life insurance policy regularly constitutes a reason for liability, because pure yield information is misleading for life insurance policies, even in the opinion of the supervisory authority. Another reason for liability, also to the detriment of intermediaries, insurance brokers and advisors, is the duty to provide advice in accordance with the requirements: the insurance contract – including the duration of the premium payment – must correspond to the needs of the customer. For this reason alone, in more than every second insurance contract “the wrong product” may have been brokered from the outset. For example, banks and advisors are also liable for misleading returns, including in the case of fund financing.
Liability for incorrect settlements of loans and life insurance policies Insurance companies must pay the customer around half of the unzillmerised actuarial reserve in all the cases concerned. A surrender value of “zero” in the first few years is therefore inadmissible – but no insurer would think of paying this money to the customer without being asked to do so. Apparently, insurers prefer to wait until the presumed 3 billion euros in customer claims have expired: The damage to their image and the mistrust of their customers is likely to be much more expensive in the medium term.
Liability of banks and insurers with krediffinanzierter ,,Sofort- -rente” – the beautiful dream of the safe profit, without Anlagerisiko, I and immediate purchase of a tax-free pension is offered to the customer not only over financed real estates, but also by combination of life insurance against Einmnalbeitrag and loan for the financing of the contribution (lever business): Not only bank advisors but also the credit institutions behind them are then surprised when a customer in distress due to losses goes to court and the bank has to compensate the loss. Also free investment consultants and financial distributors are regularly liable, because the customers are not completely informed about the numerous risks. Financial distributors like to claim “We have checked the investment model in our specialist department”: this is also a reason for liability.
Exit from uneconomic financing with cash investment for redemption The exit begins with the realization that only an independent expert examination makes the magnitude of the damage transparent for the customer: Bitter is the fact that the damage literally increases daily. In addition, advice is then needed on how tax risks can be limited during the restructuring process. Only a few credit institutes are aware of the option of potentially saving the customer the taxes completely despite the tax-damaging cancellation of the insurance contract – and thus massively reducing the damage on balance. An analysis of the contract terms and clauses reveals that numerous BGH rulings have judged the self-created financial service provider contract law to be ineffective – however, without the financial industry having reacted effectively to this. This can also result in starting points for a reversal of the contracts. Practice shows that it is only through the cooperation of experts and lawyers that the best possible basis for the rehabilitation of faulty financing can be created. Closer information to this topic gives Dr. Johannes Fiala. Attorney from Munich under telephone 089-17 90 90 35. of Dr. Johannes Fiala, attorney (Munich), MBA financial services (Univ.), MM (Univ.), examined financial and investment advisor (A.F.A.), lecturer for civil and insurance law (BA Herdenheim, Univ. of Cooperative Education), banker (www.fiala.de) and Dipl.-Math. Peter A. Schramm, expert for actuarial mathematics (Diethardt), actuary DAV, publicly appointed and sworn by the IHK Frankfurt am Main for actuarial mathematics in private health insurance (www.pkv-gutachter.de).
(Halstenbeker Magazin 2/2008, 10)
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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