Home loan insurance, credit insurance or even borrower insurance designate the same intention: protect the bank but also the property of the borrower from a possible default in the event of death, accident or loss of employment.
Required because of the amount of capital loaned, it increases the total cost of credit to the extent that it is calculated over its entire duration. It can thus reach up to 40% of the amount borrowed. Not really a good deal right now due to the very low-interest rates.
What does the cost of insurance actually represent?
The insurance rate is added to the money rate, that is to say between 0.20% and 0.60%. Insurers are based on the age of the borrower, his state of health, the particular risks to which he is exposed due to his trade or risky sports, and the duration of the mortgage.
In addition, exclusions are provided for in the contract in order to discard the insurer of any compensation.
Can you choose your insurance?
The bank which grants the mortgage will offer group insurance, the prices, and guarantees of which are identical for all subscribers. Since the Lagarde law in 2010 then the Hamon law in 2014 and finally the Sapin II law in 2017, the insurance delegation allows the borrower to choose his own insurer. It, therefore, has the possibility of taking out personalized guarantees and of competing with real savings.
In concrete terms, these laws oblige the banking organization to provide the borrower with a requirements sheet describing the guarantees offered, the rate and the overall cost of mortgage loan insurance. He is also entitled to refuse credit if the guarantees are not similar.
The essential guarantees
Price is not the only benchmark. Protection must at least include:
– the death ;
– the total and irreversible loss of autonomy (PTIA);
– permanent and total disability (IPT);
– permanent and partial disability (PPI).
If the borrower exercises a liberal profession, he will have an interest in taking out an IP Pro guarantee (professional disability) provided that the contract specifies that the disability prevents him from exercising “his profession” and not “any professional activity”, in which case he would not be compensated.