Termination of life insurance - bank refuses consent

Thinking out loud: What happens if he simply stops paying the insurance premiums for LV 2 or has them converted to paid-up status (why should the bank's consent be required for the latter?). Does this entitle the bank to terminate the loan? It seems doubtful to me, even if a corresponding contractual clause existed. Because the collateral for the loan still exists in full, it is just no longer oversecured. And even if the loan were terminated and called due by the bank, it could be fully repaid with the current surrender value, right?

But a lawyer among us

It is surely stated somewhere in the fine print that the [LV] must be serviced. Otherwise, the bank would be taking on too high a risk regarding the collateral.

If a termination by the bank occurs due to non-payment of the [LV], this would likely include the maturity of the loan including interest.
At the same time, the [TE] would have to cancel the [LV] to mitigate this. However, the surrender value of the [LV] is likely to be significantly lower.
Thus, the [TE] would incur losses twice.
I do not understand why one should take a confrontational course when it could be resolved in a normal conversation (which I actually assume).

The confrontational course could always be taken later if all talks do not help.

Thinking aloud: What happens if he simply stops paying the insurance premiums for LV 2 or has them waived (why should the bank’s consent be required for the latter?). Does this entitle the bank to terminate the loan? Seems doubtful to me, even if there were a corresponding contractual clause. Because the security for the loan still exists in full amount; it is just no longer over-collateralized. And even if the loan were terminated and called due by the bank, it could be fully repaid by the current surrender value, right?

Waiving the premium payment is a right under the insurance. Usually, the assignee receives all rights and claims from the assigned life insurance within the framework of common security agreements. Hence, also the right to waive the premium payment.

What would remain questionable, however, is on what grounds the bank should reject the application for premium waiver. Especially since the debt service capacity is rather reduced by the (superfluous) premium of the life insurance. There also exists an obligation (even partial) to release collateral in case of over-collateralization. By the way, also if the bank doesn’t like it.

If the bank now retained both insurances and rejected premium waiver as a secondary solution finally, in my opinion, it would be acting in bad faith.

But: This doesn’t have to happen if one talks reasonably with the responsible persons in the bank and doesn’t speak through a phone call with (some) clerk who (apparently) gave an easy answer.

Good post by the way (here now one of the few :-P )

It is certainly stated somewhere in the fine print that the LV must be serviced. Otherwise, the bank would be taking on a much too high risk regarding the collateral.

The premium exemption is a right arising from the insurance. Usually, the assignee receives all rights and claims from the assigned life insurance within the scope of usual security agreements. Thus, this also includes the right to premium exemption.

However, it remains questionable on what grounds the bank should reject the application for premium exemption. Especially since the ability to service the debt is rather reduced by the (unnecessary) premium of the life insurance. There is also an obligation to release (even partially) in case of over-collateralization. By the way, even if the bank does not like it.

If the bank were to keep both insurances and finally reject the premium exemption as a secondary solution, in my opinion, this would be acting in bad faith.

But: This does not have to happen if one speaks reasonably with the responsible persons at the bank and does not just have a phone call with (some) clerk who (apparently) took the answer a bit too easy.

Now I want to add my two cents as well.
The reason why the bank rejects the early repayment can only be speculated here. We don't know the contract in detail.

However, in my view, a premium exemption of the insurances should be possible. The bank's consent is certainly required for this (e.g., the insurance is not yet valuable enough - in that case, a premium exemption would endanger the collateral).
Here (with sufficiently high collateral), however, I see no reason to refuse the premium exemption.

You should – as already recommended – contact your "regular" advisor for this. He knows you, can assess your circumstances, and also sees that you want to act before the horse has bolted. Such things are difficult over the phone. What is said gets lost during the conversation, other possibilities are not considered, and the employee on the other end of the line may still have a whole bunch of work on his desk. For him, you may be an unknown case among many that should be handled quickly.
However: Could it be that the loan was taken out via an online bank? Or why are you trying to clarify such things in the impersonal, telephonic way?

Just wanted to check by phone first how things look. The responsible DB bank branch is 50 km away. If necessary, I will make an appointment and go there.

Not only the customer must fulfill the contract. This also applies to the bank as well as to the insurance. The contract should be checked here to determine whether there is a claim for compensation due to insufficient interest.