Loan insurance, also known as credit insurance or borrower insurance, guarantees the recovery of the maturities of a mortgage. It is also a protection for the borrower in case of loss of income due to an accident in life: death, total or partial permanent disability, temporary and total incapacity for work, loss of employment …
Credit insurance in this case avoids the sale of the property. What is its cost and what does it cover?
What are the consequences of credit insurance on the mortgage?
Credit insurance increases the cost of the loan because it is calculated over the total duration of the loan. It is added to the interests in proportion of 25 to 40% according to the insurers. When offered by the bank, guarantees and rates are standard, regardless of the borrower’s profile.
Can one choose his insurer?
The borrower has the opportunity to freely choose his credit insurance. Nevertheless, the bank has the right to refuse the insurance delegation if it considers that the guarantees subscribed do not offer him sufficient security.
To avoid any subjective decision, the subscriber of the loan contract has the possibility to consult the list of criteria retained by the Financial Sector Advisory Committee before presenting the guarantees subscribed at another insurer.
Our advice: prices being free, it is necessary to compare the contracts offered by different insurers based on cost, but also the proposed guarantees, exclusions provided, the deductible, the waiting period, the ceiling of guarantee and the type of compensation.
What are the advantages of borrower insurance?
Buying an individual insurance is cheaper, even if prices vary from simple to triple:
- – The premiums are calculated according to the capital remaining due, so fall over time, which is not the case of the insurance proposed by the banking organization;
- – The cover is personalized according to the age and the personal situation of the subscriber. For example, a couple in their thirties who do not have the same risks as those in their fifties, the costs of insurance will be lower.
What are the mandatory guarantees?
Among the different guarantees of the loan insurance, 4 are mandatory:
- – The death guarantee (DC);
- – The guarantee total and irreversible loss of autonomy (PTIA);
- – The Total Permanent Disability (IPT) guarantee;
- – The temporary work disability guarantee (ITT).
With the borrower insurance, we must be attentive to the chosen portion, that is to say, what will be your responsibility in case of disaster.