The borrower insurance guarantees the repayment of the credit in the event of the death, accident, or illness of its holder. If the majority of French people subscribe to the contract offered by their bank, they have the possibility of bringing into play the competition. All borrowers have the right to choose external insurance or to renegotiate their mortgage insurance with a different establishment.
Generally limited to the duration of the loan, borrower insurance includes guarantees covering the risks of death, incapacity, disability, or even loss of employment. It is a protection of the capital for the borrower, his heirs, and the bank. Some guarantees are inevitable while others are optional and may cost the insured more dearly … Here are five tips to be sure you are well covered and at the best price!
1) Take out a group contract or an individual contract?
Taking out individual borrower insurance and not a group contract offered by the bank can reduce the cost of your mortgage insurance. Too few borrowers know this, but it is possible to delegate loan insurance even before taking out the mortgage.
The group contract
The group contract is an insurance contract offered by the bank which finances the purchase of real estate. The latter is based on the principle of pooling risk and generally costs borrowers more than an individual contract. This contract can be recommended for borrowers with a health risk.
The individual contract
The individual contract is a contract taken out with an insurer external to the bank. The rates are generally more competitive, especially for younger borrowers.
Online contract comparison
It is possible to compare the contracts online, on comparison sites such as Magnolia, RéassurezMoi, or even on real estate brokers like Meilleurtaux or Empruntis.
2) Credit insurance for how long?
If real estate loans are granted for 15, 20 or even 25 years, the real period of ownership of real estate rarely exceeds 10 years. This lag must be taken into account when choosing your loan insurance.
While they tend to compare contracts over the life of the loan, borrowers sometimes forget to compare the number of premiums at the start of repayment. Some contracts may indeed impose heavier premium refunds in the early years despite a lower insurance rate. This advice is intended above all for first-time buyers who are more likely to quickly resell their first property to acquire a larger one.
The insurance rate
Just as important as the interest rate is the loan insurance rate. However, borrowers do not always pay attention to this. However, between two banks, the insurance rate can drive up the total cost of credit, with an identical real estate rate.
APR
To choose between bank A and bank B, the APR (annual percentage rate of charge) is the element to check. Indeed, this rate includes all costs related to the mortgage, including the cost of credit insurance.
3) The laws governing the change of loan insurance
Several laws govern the termination or change of mortgage loan insurance. Since 2010, several reforms have allowed borrowers to change insurance and save on their insurance premium, which in some cases can cost as much as interest.
The law on the reform of consumer credit (n ° 2010-737), also called the Lagarde law, facilitates this process: it specifies that a bank “cannot refuse another contract as collateral for a [real estate] loan. insurance “than the house contract, since it presents equivalent levels of guarantee. The bank which refuses a competing contract must justify itself.
In addition, it cannot offer a higher real estate rate for the reason of delegation of insurance. The Lagarde law can also provide a solution to borrowers whose debt ratio is a little higher than the rule of 35% insurance included. The amount of credit insurance has an impact on the overall cost of mortgage credit and therefore on the debt ratio. Taking out cheaper insurance can then allow borrowers with modest means or with health risks to obtain a mortgage.
Hamon law
The Hamon law (2014) made it possible for borrowers to change insurance after taking out the loan. But for this, borrowers must respect a notice period of 15 days at the latest before the anniversary date of the credit. It is therefore better not to wait to take the necessary steps.
The Bourquin amendment
The Bourquin amendment is another step forward to facilitate the change of insurance. Since 2018, all borrowers can terminate their insurance contract each year before the anniversary date for cheaper insurance. Two conditions: respect the principle of guarantee equivalence and a notice period of 2 months.
The law on sub-annual termination
A bill on infre-annual termination carried by the deputy Patricia Lemoine (Agir group) could soon allow borrowers to change insurance at any time. This measure, which has yet to be examined by the Senate, should facilitate competition for savings of several thousand euros over the total duration of the mortgage.
The principle of guarantee equivalence is a key element in understanding the delegation of insurance. While borrowers are free to choose insurance outside the bank, the individual contract must nevertheless present the same level of coverage, ie guarantees equivalent to the bank’s group contract. The borrower can therefore not be less well insured by changing mortgage insurance.
To avoid abuse, the CCSF has listed 18 criteria that should serve as a basis for banks to accept or not the delegation of borrower insurance. The standardized information sheet (FSI) obligatorily given to borrowers lists the guarantees covered by the insurance contract.
4) Exclusions from guarantees
Keep in mind that the price is not the only factor to take into account when comparing insurance contracts. Better to be better covered in the event of a health risk, even if it means paying a slightly higher contribution.
It is essential to take into account the exclusions linked to the contract, that is to say the events that the insurance does not always take into account. All contracts cover death and complete loss of autonomy, but different types of cover against professional incapacity exist.
All the contracts do not take into account what are called “non-objectifiable diseases” – a barbaric term that groups together pathologies that are however as widespread as back diseases or certain disorders of the psyche.
Insure with an aggravated health risk
For people with serious illnesses, the Aeras agreement is a solution. In addition, the notion of the right to be forgotten applies to all people who have been cured of a serious illness for 5 years for people under 21 and 10 years for those over 21. The latter do not have to declare their illness in their health questionnaire, allowing them to be insured without additional premium and without exclusion of guarantees …
Job loss insurance
The job loss guarantee is optional insurance that covers the borrower in the event of redundancy.
One of the most important elements in choosing an insurance contract is to look at the compensation conditions. These vary from contract to contract and may be more advantageous in some cases.
Thus, some contracts provide for a fixed compensation, others a compensation formula. Finally, the elimination periods may also vary.
5) Health examinations
The borrower must attach to his subscription file a declaration of a state of health or a medical questionnaire. At least. Because depending on his age and the amount to be insured, he will also have to submit a series of medical documents attesting to his state of health (medical report, blood profile, electrocardiogram, etc.).
