One of the most common sticking points of the March home insurance switching window is not the paperwork but a phrase on the old policy: ‘long-term discount’ (tartamengedmény), ‘loyalty period’ (hűségidő), ‘the policyholder waives the right to cancel’. Many people give up on switching at this point; others do exactly the opposite: they cancel, and then the insurer's letter reclaiming the discount arrives as a surprise. As a broker, I see that the loyalty period is in fact an item that can be calculated precisely – you just have to look at it in advance, not after the event. This article shows what a loyalty period means legally, what the insurer can reclaim, and how you can decide on the basis of numbers rather than gut feeling.
- A loyalty period does not prohibit cancellation: the contract can be cancelled in March and at the renewal date alike, but the insurer may reclaim the long-term discount it granted for the longer term – depending on the policy conditions, a proportionate part of it or even the full amount.
- Reclaiming it is not a penalty but the withdrawal of the discount: according to the guide of MABISZ (the Hungarian insurers' association), it can also be claimed if the contract ends through non-payment of the premium, while for cessation of the insurable interest (sale, moving house) the policy conditions may provide otherwise – you need to check this in your own policy conditions.
- Before switching, a single calculation decides: the amount of discount to be repaid for the remaining loyalty period, set against what the new contract offers in cover and premium – and the result often favours staying.
What is a loyalty period, really?
Home insurance is typically an open-ended contract which, under the rules of the Hungarian Civil Code (Ptk.), can be terminated as of the end of the insurance period by a notice of cancellation given at least 30 days in advance. A loyalty period does not change this: the contract remains open-ended; it is merely that, in a clause, the policyholder undertakes not to exercise the right to cancel for a specified period and receives a premium discount in return. Under Section 6:466 (2) of the Ptk., the right to cancel can be excluded for no more than three years, and in a consumer contract this may not be departed from to the client's detriment – in practice, therefore, the loyalty period does not prohibit cancellation but provides the basis for reclaiming the discount. The 2025 Home Insurance Guide of MABISZ (the Hungarian insurers' association) puts it this way: ‘In return for a long-term discount, the policyholder undertakes not to cancel the contract, or terminate it through non-payment of the premium, for 2–3 or even 5 years.’ The size of the discount differs from insurer to insurer and is shown on a separate line on the policy or the proposal – if you cannot find it, the insurer's customer service is obliged to tell you whether your contract contains such a clause and how long it runs.
An important distinction: a loyalty period is not the same as a fixed term. A fixed-term contract ends by itself on expiry; an open-ended contract with a loyalty period, on the other hand, continues to run after the loyalty period has ended, only without the risk of the long-term discount being reclaimed. It is worth asking the insurer whether, once the period expires, the discount – and with it a new loyalty period – renews automatically, because this differs from one set of policy conditions to another and will raise the same question again the next time you switch.
What can the insurer reclaim, and when?
A loyalty period is not a ban on cancellation. Under Government Decree 25/2023. (II. 1.), which introduced the March switching option, and subsequently under the rule transferred into the Insurance Act (Bit.) and in force today (Section 124/C of the Bit.), open-ended property insurance on residential property can be cancelled free of charge in March every year, regardless of the renewal date – and this also applies to contracts with a loyalty period. The February 2024 question-and-answer guidance of the MNB (Hungary's central bank and financial supervisor) is, however, clear about the consequence: ‘If the policyholder has committed to a loyalty period in return for a premium discount and cancels the contract early, the insurer may reclaim even the full amount of the loyalty discount (long-term discount).’ The MABISZ guide describes the same logic, with an important addition: the insurer is also entitled to reclaim the discount if the contract ends because the premium has not been paid – so the loyalty period cannot be circumvented by ‘forgetting’ the premium either.
Whether the insurer reclaims the full discount or only a proportionate part of it depends on the policy conditions: the MNB's supervisory announcement refers to repayment of ‘a proportionate part of the discount’, and in practice Hungarian policy conditions typically base the amount on the remaining term or on the discount received so far. The legal framework does not specify the method of calculation, so you need to read your own policy conditions – our guide to reading policy conditions highlights this specifically in the ‘termination of the contract’ and ‘premium’ sections. What you do need to know, however, is this: the insurer can only claim back what it granted as a discount under the contract; there is no late-payment or ‘penalty’ charge on top of that, and if the contract ends through cessation of the insurable interest – you have sold the home or moved out – the policy conditions typically do not treat this as a breach of the loyalty commitment, because it is not the policyholder's decision but the end of the insurable interest that brings the contract to a close.
The calculation that settles the decision
Switching during a loyalty period comes down to a single question: will you gain more with the new contract over the remaining loyalty period than the old insurer reclaims? On the left-hand side goes the discount to be reclaimed – you can ask the insurer for this figure in writing, before you cancel; on the right-hand side goes what the new contract offers. Here, as a broker, I see two mistakes again and again. The first is looking only at the difference in premium: if the new offer costs less because of a lower sum insured, a higher deductible or narrower cover, the ‘gain’ is only apparent – this is discussed in detail in the comparison of premium and cover. The second is letting emotion make the decision – ‘I won't let them profit at my expense’ – when, with half a year of the loyalty period remaining, the difference is often such that waiting until the next renewal date is the calmer solution.
If there are still years left of the loyalty period and the cover under the old contract is in order, staying is often the right decision – in that case, updating the sums insured at the renewal date is worth more than switching. If, however, the cover really is deficient (an underinsured building, missing cover for escape of water from pipes or for liability, an excluded type of home), the cost of repayment may be the lesser evil, because in a major claim the gap costs more than the discount. Only your own numbers decide; neither ‘switch whatever happens’ nor ‘never touch it’ holds true in general.
If you do decide to switch: the order of steps
Switching during a loyalty period follows the same timetable as any home insurance switch, with a few extra steps. First, ask the insurer in writing for the amount of the long-term discount to be reclaimed and the basis of the calculation – this letter is the basis of your decision and, later on, a means of avoiding a dispute. Second: a condition of cancellation is typically that the contract's premiums are paid up, so pay the premium due before you cancel. Third: according to the MABISZ guide, a March cancellation must reach the insurer by 31 March, and contracts cancelled in March all end on 30 April – so cover under the new contract has to be timed to start on 1 May, so as not to leave a gap. For cancellation at the renewal date, the 30-day rule applies, as explained in the article on switching at the renewal date. Fourth: if there is a mortgage on the property, the bank must be notified, and the mortgagee clause must also be entered on the new policy.
The insurer typically claims the discount back after the contract has ended, by sending an invoice or a demand for payment; if you dispute the calculation, the first step is the insurer's complaints procedure, after which the Financial Arbitration Board (PBT) or the courts can decide – the MNB does not rule on individual disputes. Paying this amount is your obligation, which the broker cannot take over; what I do undertake is this: if you let me know before the renewal date or the March deadline, I prepare the calculation relating to the loyalty period and the necessary paperwork, so that the decision is not guesswork.
What should you do now?
Get out your policy and look for the terms ‘tartamengedmény’ (long-term discount), ‘hűségidő’ (loyalty period) or ‘felmondási jogról lemondás’ (waiver of the right to cancel), together with the expiry date. If you cannot find them, ask the insurer in writing, and ask for the amount that would be reclaimed as well. Then compare the cover of the old contract with the new offer – not the premium, the cover – and only if the balance is clear-cut, start the cancellation, keeping to the deadlines. The article on switching mistakes goes through the other typical pitfalls as well.
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Sources
- MABISZ (Hungarian insurers' association) Home Insurance Guide (20 February 2025) – Chapter 7: cancellation, long-term discount
- MNB (Hungarian central bank / supervisor): Questions and answers – the March home insurance switching option (14 February 2024)
- MNB supervisory news: Exceptional opportunity in March to re-arrange home insurance (2024)
- Insurance Act (Bit.) Section 124/C – Act LXXXVIII of 2014 (March cancellation of property insurance on residential property; the rule that replaced Government Decree 25/2023. (II. 1.))
- Hungarian Civil Code (Ptk.) Section 6:449 and the rules on the termination of insurance contracts (Act V of 2013)
- Financial Arbitration Board (PBT, MNB)
- UNIQA – Cancelling home insurance (insurer's information on the March cancellation option, Bit. Section 124/C)
