Are you about to take out a home loan? Your bank has certainly raised the issue of borrower insurance: essential protection that will guarantee you against life’s accidents throughout the repayment period. In detail, here is how home loan insurance works and some tips for getting it at the best price.
Like most insurance products, borrower insurance is essential protection when you take out a mortgage with a bank. For what ? Imagine that following an accident or an illness, you lose your job and you find yourself unable to continue reimbursing your monthly payments… Thus, adequate coverage will prevent you from contracting debts.
Concretely, mortgage loan insurance will cover the following risks for the entire duration of the repayment:
Taking out mortgage loan insurance means guaranteeing the repayment of your loan until the end. It serves to protect both the borrower and his family, so that in the event of a problem in the payment of monthly payments, no loved one will be forced to assume the debt.
Essential, yes… But not mandatory! Indeed, the law does not oblige the borrower to take out this protection when signing a mortgage. Everyone is free to do what they want. However, in practice, the banks will make obtaining this insurance a condition sine qua non before giving their agreement. In other words: no coverage, no credit.
However, it is not necessary to take out all the potential guarantees of mortgage loan insurance. The bank will require coverage in the event of death or loss of autonomy (partial and total), that is to say, it will ask you for protection against serious accidents of life. By not including additional guarantees (unemployment, temporary interruption of work), you actually reduce the cost of your insurance.
Also be aware that when taking out borrower insurance, the insurer will ask you to complete a medical questionnaire in order to know your state of health – with the risk of forfeiture of cover in the event of false declaration or omission. Take a look at this page to find out more.
Are you convinced of the importance of home loan insurance? There remains the question of the price: such coverage can easily cost you between 20 and 30% of the total amount of the credit. This amount can be reduced by declining the bank’s offer and taking advantage of the so-called “insurance delegation” system.
The delegation of insurance, provided for by the Lagarde and then Hamon laws, gives you the opportunity to take out cover other than that offered by the bank. Bank insurance, in fact, is a group contract that pools the risks on all borrowers – which is why it is generally more expensive than personalized insurance.
Comparing offers from insurance organizations allows you to take out home loan insurance that really meets your needs, that adapts to your profile, and that weighs less heavily on your credit than the group contract offered by the bank. If you are interested in delegation, do not forget to ask your banker for the standardized information sheet which will facilitate your comparison process.
Your only obligation is to take out insurance with the minimum guarantees set by the bank. Here you will find all the information you need to benefit from the delegation of mortgage loan insurance and thus provide this essential coverage when you borrow!