In the end, pay more for loan insurance than the interest itself: this is now the situation for many borrowers. Usually imposed by the bank, this insurance makes it possible to repay the loan if the borrower dies or if he is prevented from working. Its rate is in addition to the interest rate and is part of the annual percentage rate of charge (APR), which tells the borrower how much the entire loan will cost them and allows offers to be compared.
Banks systematically offer insurance with credit, through their subsidiaries, and “Borrowers are focusing on the interest rate, without looking at additional costs, while it is now the cost of insurance that must be scrutinized”, deplores Toufik Gozim, founder of Assurly, a start-up specializing in creditor insurance.
While a few years ago, insurance was generally already heavy, between 30% and 50% of the total cost of mortgage credit, in a context of low borrowing rates, it can now represent more and more often more 50% of it, according to Magnolia.
“Three years ago, only senior borrowers or at risk, suffering from a pathology or practicing a dangerous activity, saw the cost of their insurance exceed that of the interest. Now almost all borrowers over 40 are in this situation ”, regrets Astrid Cousin, spokesperson for this loan insurance broker.
Concretely, illustrates Magnolia, this means that a 40-year-old couple borrowing 350,000 euros over twenty-five years at an interest rate of 1.40% will pay, over the term of the loan, 65,018 euros for the interest rate and 66,500 for insurance. And a 55-year-old couple borrowing 410,000 euros over twenty years at an interest rate of 1.10% will pay out 46,950 euros for the interest rate and 82,000 euros for insurance.
Great savings
What explains this situation? “Banks no longer earn enough money with credit and are catching up on insurance. A bank achieves an average margin of 50% to 80% on borrower insurance, so it will not offer its client to play the competition ”, we loveme Cousin.
Competition: only 12.40% of borrowers did so in 2019, according to the Financial Sector Advisory Committee. The Banking Insurance Optimization expertise firm precise that Crédit Mutuel and Crédit Agricole (56% of new credit contracts alone) only accepted 4% of insurance outsourcing in 2019.
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