contract termination/substitution at any time, but at what cost?

Supported by the decision of the Constitutional Council on January 12, 2018 (Decision 2017-685 QPC), the possibility of the termination/substitution of a borrower’s insurance contract guaranteeing a mortgage is gradually and too slowly opening up to the borrower : within twelve months of signing the credit and insurance offer; annually, on the anniversary date of the borrower’s insurance contract. From June 1 and September 1, 2022: at any time.

As of September 1, 2022 for all loans and for all insurance in progress (from June 1, 2022 for new loans), the termination of the borrower’s insurance will be open to borrowers at any time (“infra-annual termination,” article L. 113-12-2 of the Insurance Code) This additional right of the borrowers/insured could in principle allow them to substitute an equally effective and less expensive loan insurance, for the too expensive “group insurance” contract imposed by the lender according to unfair commercial practices (either misleading or aggressive).

The insurer (including the one proposed by the bank) informs the insured each year of the right of termination, the terms of termination and the various notification and information deadlines that he must respect.
It is also possible, in theory, to opt for any borrower’s insurance before signing the mortgage loan contract.

The request for substitution of the borrower’s insurance contract by a borrower’s insurance contract with equivalent guarantees can be made by various means: registered mail with acknowledgment of receipt, simple mail, by declaration to the representative of the insurer (the bank acting as insurance intermediary), by means of electronic communication (art. L. 113-14 of the Insurance Code).

Since June 1, 2022, loan insurance for a portion of 200,000 euros (400,000 euros for a couple) whose reimbursement is made before the sixtieth birthday of the borrower, will be devoid of any medical questionnaire. Beneath its supposedly altruistic exterior, this “compensation” generously offered by parliamentarians to French banks has the sole purpose of maintaining the high price and margin level of these insurances. Changes in offers and their prices therefore remain to be discovered and analysed.

The free choice of borrower’s insurance is a right of borrowers, not lenders. It presupposes the free exercise of insurance intermediation by Intermediaries, in particular Mortgage and Insurance Brokers, without hindrance from lenders. This freedom for borrowers will be all the more effective in France as the Banque de France/ACPR will actively monitor the commercial practices of lenders, as well as the relationship between cost and guarantees of borrower insurance (see: News, November 29, 2021, or: https://lieu-avocat.fr/assurance-borrower-controler-les-pratiques-commerciales-des-preteurs/)

LAW n° 2022-270 of February 28, 2022 or: https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000045268729

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