Some policyholders are unpleasantly surprised when they attempt to cancel an insurance policy in Spain. This article shows the pitfalls, explaining how to successfully overcome them without incurring in extra expenses or even being denied its cancellation!
By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of January 2013
It is always an unpleasant surprise to find out that you are unable to cancel a policy – the company turn you down – because you failed to notify your insurance company in the due manner within the contractually pre-agreed timescale.
This article focuses exclusively on how – and when – to terminate your insurance policy without attracting surcharges.
Spain’s Insurance Contract Act (Law 50/1980, of 8th of October) rules in general on all insurance policies. This law has seen numerous amendments over the years. Your contract (general and particular clauses) and this law are the legal framework.
The Two-Month Notice Rule
Art 22 specifically rules on when to cancel a policy. A policyholder must notify their insurer with at least two months’ notice before the end of their contract.
Don’t think for one moment that only because you give your bank an order to stop paying your monthly premium that implies you are cancelling the insurance – it is not the case and you are only in for legal problems.
Your insurance contract will have a date on which the cover starts i.e. 1st of January 2013. That is the date that you must keep track of when you intend to cancel. Your contract will run its course normally on the 31st of December of 2013. Following this example, you would have to notify your company, at the latest, in October 2013. Always well-ahead of the two-month deadline. They must receive your letter ahead of the two months, not after. Most insurance contracts are valid for one year and are automatically renewed unless stated otherwise by either party.
Insurance policies are automatically renewed year on year without your input! So if you fail to notify them within the pre-agreed timescale they will take for granted you wish to continue your policy and will continue with the direct debit as normal as from January 2014 and onwards.
Bottom line, you actually have a narrow window of opportunity in which to cancel an insurance policy successfully. Failure to comply with it will attract extra expenses and surcharges; namely you still have to pay for the remaining of the contract’s duration.
How to Notify: Burofax
You can do it in a number of ways really, but I would always recommend that you draft a letter and send it to your insurance company by burofax (registered communication) with both acknowledgement of content and receipt (‘Acuse de Recibo y certificación de texto/copia certificada’). A lawyer can assist you drafting this legal communication – it goes without saying that it must be in Spanish. If you write it in English, or in any other language for that matter, it will be ignored and binned.
By requesting at your local post office acknowledgement of both content and receipt, it ensures the following:
Yes, it is more onerous than simply sending them an email, letter or fax but unlike the former, a burofax can be used as irrefutable legal evidence – if necessary – before a law court should problems arise such as the contract cancellation being contested. Companies continually change fax numbers or social addresses; employees are made redundant day in, day out – your letter, fax or email may get ‘lost’ .
By sending them a burofax with acknowledgement of receipt, for which they have to sign for upon receipt, you are taking excuses away from them. They won’t know what the letter is about or what it says until they have first signed for it. As legal communications in Spain are frequently sent by burofax they will not chance it and be forced to sign it because they simply ignore who’s sending the letter and what its content is.
Insurance companies are notorious for their lack of support on cancelling a contract. They do not make it easy at all for their customers – I’m talking out of my own personal experience here, not a client’s. If you add to that the problem of notifying them within the legally stipulated timescales it only compounds the problem furthermore. Insurance policies are very easy to sign up for but difficult to withdraw from, at least scot-free.
The whole idea behind a burofax is to be proactive and pre-empt any challenges by self-creating legal evidence that may be upheld before a law court – only if necessary – should your company contest you terminating your contract.
With the ongoing ‘recession’ companies are highly reluctant to lose customers and at times may try to thwart any attempts of pulling out. Notifying them by burofax is simply playing it safe and covering yourself against any eventuality.
Completely ignore the following flawed advices which sadly are still commonplace:
The address to which it must be sent is normally the one included within the insurance contract, the companies’ registered address for all legal intents and purposes. Always make sure the address is the current one, specifically if your contract was signed for years ago. Don’t send this communication to your insurance broker – he’s not a party to the contract, unless specified otherwise.
What happens if I notify my insurance company after the two-month period is up or even at any another time?
A common occurrence nowadays is for expats to move back into the UK because of Spain’s grim job market outlook. Few people actually plan ahead with so much foresight. Fact is that if you wait until the last minute to cancel your insurance you may find the nasty surprise that you are still liable to pay for the remaining months of the contracts duration. No-one wants to start receiving threatening lawyer’s letters chasing you up for the outstanding monies owed to the insurer.
If you already know that you are likely to be moving abroad within the next year or so you can plan ahead for this moment and save yourself considerable aggravation and expenses by simply following my above advise. If you cancel your policy as I’ve outlined you won’t be troubled by them.
If you fail to comply within the stipulated notification period you are liable to pay for the full remaining duration of the contract! So bottom line, you can pull out of the contract at any time – but you will be held liable to pay for the remaining months. This is simply another fancy way of writing that the insurance company simply denied your request to terminate the policy ahead of time and is making you pay for the full remaining duration of the contract. They will pursue you legally for the shortfall.
If you really want to terminate it scot-free, follow my above advice on the two-month notification period and send it by burofax.
Can I still cancel if the insurance company increases the costs after the two-month notification period is over?
Not without being held liable for the remaining duration of the contract. So the short answer is a nay. Some insurance companies will sneakily introduce amendments to the contract after the two-month period has elapsed. They do this so you are stuck with them until the following year if you wish to cancel. On the following year you will have to notify them two months ahead of your intention to terminate the contract.
And in the event of death?
Yes, this is one of the few cases in which the two-month rule can be legally overridden. You will be asked to provide a copy of the policyholder’s death certificate to support the cancellation request.
And if my insurance was linked to my mortgage application? Can I still cancel it?
It depends. Read carefully the stipulations (specifically the particular ones tailored for you; as well as the general clauses). Normally they cannot be unilaterally terminated by the holder because they are part of a broader contract which is the mortgage loan. You have been given a lower mortgage quote precisely because you also hired linked financial products such as a home insurance. Pulling out may impact how much you are being charged for your mortgage and you will normally be forced to hire an alternative one. Read my article on the matter: Spanish Mortgage Loans: Beware of Abusive Clauses.
An insurance policy is like any other legal contract – you must abide by its rules. Spain’s Insurance Contract Act requires policyholders to give their companies, as general rule, a two-month notice period to terminate a policy (individual cases may differ however). These two months are counted as from the time of the contract’s expiration so there is actually a narrow window of opportunity in which to cancel it successfully.
A lawyer can greatly assist you cancelling a policy, carefully planning ahead to terminate it within the legal timescales without attracting surcharges. Mitigating expenses and successfully terminating it in a legally accepted manner that will not be challenged.
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