Understanding Real Estate Borrower Insurance: Guarantees, Prices, and Options Explained

L’real estate borrower insurance is a key element when taking out a mortgage. In this article, we will explore the offer ofhome loan insurance according to the guarantees ofborrower insurance (main and complementary). But, also, the average price of the insurance according to the needs and situations, and the methods of calculation. We will also discuss the mandatory guarantees, such as the death guarantee, ITT, and loss of employment, as well as the change of loan insurance in connection with the Lemoine law in 2021.

Real estate borrower insurance guarantees

Home loan insurance is designed to protect the borrower and the bank in the event of a hardship. The guarantees offered by borrower insurance vary according to the needs and situations of each individual. Here are the main guarantees offered:

Main guarantees

• Death benefit. In the event of the death of the borrower, the insurance covers the repayment of the outstanding capital.
• Total and irreversible loss of autonomy (PTIA). If the borrower suffers from a total and irreversible loss of autonomy, the insurance reimburses the outstanding capital.

Additional guarantees

• Total temporary incapacity (ITT). This guarantee covers the borrower in the event of total and temporary incapacity to work.
• Total permanent disability (IPT). In the event of permanent and total disability, the insurance covers the reimbursement of the outstanding capital.
• Partial permanent disability (IPP). This guarantee covers the borrower in the event of permanent partial disability.
• Job Loss. In the event of involuntary job loss, the insurance covers part of the repayment of the mortgage.

The average price of home loan insurance

The cost ofhome loan insurance depends on several factors, such as:

• age,
• health,
• the amount of the mortgage,
• and the duration of the loan.

To estimate the cost of your insurance, you can use an online comparator or directly consult the offers offered by banks and insurers.

Mortgage insurance calculation methods

There are two main methods to calculate the cost ofborrower insurance :

Calculation on the initial capital

The insurance rate is applied to the initial amount of the loan. The cost of the insurance remains constant throughout the duration of the loan. Suppose you take out a €200,000 home loan over 20 years (240 months) with an insurance rate of 0.3% of the initial capital.

• The cost of insurance is calculated as follows: €200,000 x 0.3% = €600 per year.
• The monthly cost of the insurance is €600 / 12 months = €50.

In this case, the cost of the insurance remains constant throughout the duration of the loan, ie €50 per month for 20 years.

Calculation on the outstanding capital

The insurance rate is applied to the capital remaining due at each due date. The cost of insurance gradually decreases with the repayment of the loan. Let’s take the same loan of €200,000 over 20 years (240 months), but with an insurance rate applied to the outstanding capital.

• Suppose that the insurance rate is 0.36% of the outstanding capital.
• The insurance cost for the first month is calculated as follows: €200,000 x 0.36% / 12 months = €60.

After the first repayment, the outstanding capital decreases. Suppose that the capital remaining due after one month is €199,500. The cost of insurance for the second month would be: €199,500 x 0.36% / 12 months? €59.85.

Thus, the cost of insurance gradually decreases with the repayment of the loan. The more you repay, the less you pay for borrower insurance.

The essential guarantees of mortgage borrower insurance

Certain guarantees are strongly expected within the framework of a home loan. Banks generally require the following guarantees:

• Death benefit;
• Total temporary incapacity (ITT);
• Total Permanent Disability (IPT) for loans above a certain amount.

Some banks may also require a guarantee of Job Loss for permanent employees.

The change of mortgage insurance

The Lemoine law

The Lemoine law allows borrowers to change at any timeloan insurance. And, this, for the entire duration of the mortgage. Indeed, this law aims to promote competition and allow borrowers to benefit from better insurance conditions.

> Consult our article on “Borrower insurance: One year after the adoption of the “Lemoine” law”

The Hamon law

The Hamon law authorizes borrowers to change borrower insurance during the first year following the signing of the mortgage loan contract. In fact, this law facilitates the change of insurance for borrowers who find a more advantageous offer elsewhere.

Insurance delegation

The delegation of insurance is the fact of taking out mortgage loan insurance with an external insurer. That is to say different from the offer proposed by the bank. This option can make it possible to save on the cost of insurance, while benefiting from guarantees adapted to the situation of the borrower.

Choose your borrower insurance

Oradea Vie is a life insurance company that offers a delegated borrower insurance offer. If you wish to take out borrower insurance for your property purchase, Oradea Vie can offer you a contract adapted to your profile and your needs. Thus, the amount of the contributions will depend in particular on your age, your professional situation and the guarantees chosen.

What happens in the event of a claim?

In the event of a claim, Oradea Vie takes care of the reimbursement of the monthly installments of your mortgage, according to the guarantees taken out. In this, the borrower insurance offer offers protection in the event of:

• death,
• permanent disability or temporary incapacity for work,
• other additional guarantees, according to the choices of the insured.

Termination is possible according to the conditions provided for in the general conditions, and the Lemoine law of 2022 allows you to change borrower insurance at any time. In addition, Oradea Vie also offers insurance delegation, which allows you to choose external insurance to cover your home loan.

To obtain a personalized quote adapted to your situation, a simulator is available on the website. www.oradeavie.fr. An advisor will be available by phone to help you determine the guarantees and options that correspond to your profile and your real estate project.

Finally, it should be noted that the assumption of risks associated with borrower insurance depends on the quality of the contract chosen. This is why Oradea Vie supports you in this choice by providing you with all the information you need to make an informed decision.

Real estate borrower insurance is an essential element to secure your real estate project. By choosing insurance adapted to your needs and by taking advantage of the competition, you will be able to optimize the cost of your insurance and protect your investment in the event of a hard blow. Do not hesitate to compare offers and use online tools to find the insurance that suits you best.