The question ofborrower insurance systematically arises when requesting real estate loan. Protection for the insured and for the lending bank, it is unfortunately too often neglected by the first, focused on obtaining financing for their real estate project. Here, in 4 essential points, what you need to know about borrower insurance and why it is so important.
Do I have to take out borrower insurance?
No law requires you to take out borrower insurance. However, given the amounts involved over an often long period in the context of a real estate loan, banks will require guarantees for protect against payment defaults. Borrower insurance remains optional in the case of a consumer loan.
The insurance aims to reimburse the bank if the borrower is victim of a life accident which would deprive him of the financial means to assume his debt. It intervenes in very specific situations, covered by specific guarantees:
- death
- 100% dependency
- total or partial permanent disability
- work stoppage due to illness or accident
- Job Loss.
Borrower insurance should not be confused with other guarantee claimed by the bank: the mortgage or guarantee comes into play in the event of payment default in all situations not covered by insurance.
Can I choose my home loan insurance?
The bank systematically offers its borrower insurance contract. You are free to accept it or him prefer external insurance. The Lagarde law has in fact allowed any borrower since September 2010 to refuse the lender’s formula and to subscribe to the insurance of your choiceprovided that it presents a equivalence of guarantees.
The free choice of insurance is a fundamental right for borrowers, because it gives them the opportunity to pay the right price by putting offers in competition. Bank loan insurance contracts are often not very competitivebecause they are designed on the principle of pooling of risks which does not take into account all the characteristics of each profile. “Good risks” pay for bad ones. Bank insurance is up to three times more expensive than the competition.
It is strongly recommended to use a home loan insurance comparator to access the best alternative offers on the market. To respect the equivalence of guarantees, use the standardized information sheet delivered by your bank: it details all the guarantees required for granting the loan.
Although you have the right to take out the insurance of your choice, you cannot, however, choose the guarantees. It only belongs to the bank define coverage according to the level of riskbut you can enhance your protection by going beyond the minimum guarantees required.
How much does borrower insurance cost?
On average, borrower insurance costs a third of the overall cost of a mortgage and in the majority of situations, the insurance rate oscillates between 0.20% and 0.60%. In the event of increased risks, this rate may increase beyond 1% of the borrowed capital.
The cost of home loan insurance depends on several factors:
- your age
- your health
- your profession
- vos life habits (smoker or non-smoker, practice a dangerous sport, heavy roller)
- THE credit characteristics : amount, duration, nature, share of the capital to be covered if borrowing together (loan insurance portion)
- the level the guarantees.
To apply a rate, the insurer, whether the bank or an external service provider, asks you to complete a home loan insurance health questionnaire. It is obligatory to answer all questions in good faith under penalty of seeing the contract canceled or not being compensated in the event of a loss linked or not to the omitted or undeclared risk.
However, the regulations have removed medical selection in some cases. In accordance with the Lemoine 2022 law, you do not have to complete a health questionnaire if your real estate credit does not exceed €200,000 with a term before your 60thth birthday (ceiling of €400,000 for a couple with an insurance rate of 50% on each head).
Can I change borrower insurance?
Borrower insurance is therefore an essential component of any real estate loan, for obtain bank financing and to protect you in all circumstances. It is also important in terms of cost, hence the interest in bring in competition.
Unfortunately, the free choice established by the Lagarde law is difficult to exercise when applying for a loan: lack of information, pressure from the bank to impose its contract, fear of wasting time in other administrative procedures, the reasons to subscribe internally clear the borrower. You have the possibility to catch up with you later.
Thanks to the Lemoine lawyou have the right to change your mortgage insurance at any time, without any other constraint than respect the equivalence of guarantees between the two contracts. You no longer have to wait for the due date as required by the Bourquin amendment. Here again, the delegation of insurance during the loan has the same advantages: be covered at the right price with tailor-made guarantees.
Last Monday, the first assessment of the Lemoine 2022 law was published by the CCSF on the reform of borrower insurance (Financial Sector Consultative Committee). The figures demonstrate the great success of the system: +80% of contract changes thanks to the Lemoine law in seventeen months.
No longer doubt the importance of borrower insurance. It constitutes a tremendous savings lever in first intention as well as during the loan. Consult our barometer of real estate purchasing power for January 2024 to measure the financial interest of subscribing to a individual insurance that meets your needswhile respecting the bank’s requirements.
2024-01-18 05:53:36
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