Subscription to a mortgage loan commits you to a long repayment period: 15, 20, 25 or even 30 years. During this long period where you have to repay the monthly payments of your mortgage, you are unfortunately not immune to finding yourself in a difficult situation that prevents you from honoring your payments. It is therefore important to protect yourself by taking out loan insurance to protect yourself against any risk of default (sickness, accident, loss of employment, death) and protect your loved ones.
Why buy real estate credit insurance?
In the event of a credit contraction, the lending financial institution in most cases requests the purchase of mortgage credit insurance.
Guarantee the repayment of the real estate loan in case of accident of life
Real estate credit insurance is a security for the bank: it allows it to protect itself against the risk of credit insolvency. Indeed, if for one reason or another, the borrower is no longer able to repay the monthly loan, it is the credit insurance real estate to take over and repay the loan. Insurance is of two types.
Group mortgage insurance,
which will be offered to the borrower by the financial institution that contracts the loan.
“Individual” mortgage loan insurance,
which are offered to the borrower by insurance agencies external to the lending bank.
Terms of a loan insurance
Following an application for loan insurance underwritten by a borrower, the insurer gives him a health questionnaire to be completed accurately and honestly. In case of misrepresentation or omission, the insurer may review the conditions of the contract, or even invoke the nullity thereof. Following the study of the medical questionnaire completed by the insurance candidate, the insurer proceeds to the evaluation of the risks to be covered and submits to him / her a proposal of insurance: offered guarantees, conditions of assumption, exclusions, cost annual insurance, amount of monthly payments …
The loan insurance guarantees generally required by the lending institutions cover the risks of death, sickness and disability, and loss of employment. The guarantees of a loan insurance contract are as follows:
The death guarantee is the basic guarantee of loan insurance. It is unavoidable. In the event of the death of the borrower, the insurer fully reimburses the capital remaining due to the bank, according to the insured portion.
Total and Irreversible Loss of Autonomy Guarantee (PTIA)
Accompanying the death guarantee systematically, the PTIA guarantee allows the reimbursement by the insurer of the capital remaining due to the bank in case of incapacity of the borrower, following an accident or an illness, to carry out a remunerated activity and being found in the obligation to seek the assistance of a third person to perform the daily acts of life.
Temporary Interruption Warranty
The ITT warranty complements the PTIA warranty. In the event of the insured person’s work stoppage due to a temporary disability situation, following an accident or illness, the insurer reimburses the loan’s due dates.
Permanent Interruption Guarantee (IPT)
The IPT guarantee allows the repayment of the loan due dates by the insurer in the event of a permanent stoppage of work by the insured.
Partial Permanent Disability Guarantee (IPP)
The IPP guarantee allows for the partial reimbursement of loan maturities in the event of partial permanent disability preventing the insured from engaging in any remunerative activity. The amount reimbursed by the insurer depends directly on the disability rate of the insured (found by a doctor).
It is an optional guarantee of loan insurance. In case of loss of employment of the insured, the insurer refunds the loan monthly or in full to the bank.
The insurance quota
The portion of a loan insurance represents the share of each of the co-borrowers. When borrowing alone, the quota must be 100% minimum because the amount of capital borrowed must be guaranteed in its entirety. In the case of a loan subscribed to two, the insurance portion must be distributed according to the level of income of each co-borrower. The main thing is to total a minimum quota of 100%, different choices are possible: 60/40, 50/50, 70/30 … It’s all about spreading the risk in a fair way. It is also possible for borrowing spouses to opt for a 100% share in order to benefit from total coverage by the insurer.
In the event of the death (or total and final disability) of one or the other co-borrower, the insurer reimburses the remaining capital due to the bank according to the deceased’s share. If, for example, this percentage is 70%, the insurer then reimburses 70% of the outstanding capital. This means that the remaining spouse will continue to repay 30% of the outstanding principal.
Exclusions are the risks that the insurer does not cover. There are three main types of exclusions:
- professional exclusions
- health exclusions
- sports or leisure exclusions
Occupational exclusions are trades that are considered to be at risk and that do not allow reimbursement by the insurer in the event of a claim (firefighter, stuntman, pilot, etc.). The exclusions of health are the diseases not allowing taking charge in case of incapacity of work (problems of back, psychological problems …). Finally, sports or leisure exclusions are activities that do not entitle the insurer to benefits (combat sports, horse riding, extreme sports, etc.).
The free choice of its credit insurance immo
The borrower is free to choose equivalent insurance from an outside agency: he then uses the insurance delegation. His credit insurance real estate can then be much more advantageous. The calculation of the rates of the credit insurance offers will take into account the age of the borrower, his sex, his professional situation, his state of health and finally the capital borrowed.
The Lagarde law allows people wishing to engage in a mortgage to subscribe to insurance different from the group insurance offered by the lending institution.
However, in fact, many bankers still refuse the delegation of real estate credit insurance: it is estimated that a third of young people under 35, for example, are denied the delegation of insurance by their bank.
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Hence the interest of being well informed about your rights to mortgage insurance before engaging in loan procedures. This will help to remain firm in front of his interlocutor, if it is illegal. Finally, we must also be vigilant about particularly low mortgage insurance rates. They can hide disadvantageous conditions and not be a good deal for the borrower, even if that seems to be the case.
Change insurance in the course of the loan
If your coverage needs have changed as a result of a change in your personal or business circumstances, if your insurer has revised your rates upwards or your insurance is costing you too much, it is in your interest to change your insurance policy. ready to get better guarantees or pay less!
You are entitled to change insurance during the loan! To do this, simply find a contract with guarantees equivalent to the current contract and then present it to your banker. The latter may then terminate your contract according to the termination conditions, in particular according to the due date of the contract (anniversary date of subscription), and set up the new one.