Which borrower insurance to choose?

L’borrower insurance is taken out to secure a loan in order to be covered in the event of death, incapacity and/or loss of work.

When one of these cases occurs, the reimbursement of the installments of the loan is made by the insurer, in full or in proportion.

It guarantees the repayment of the outstanding capital of your loan if you were no longer able to do so. This insurance therefore protects both the borrower and his family, but also the lender, from possible unpaid debts. Essential for all types of credit: consumption, car, mortgage, etc.

What exactly is borrower insurance and how to choose the one that suits us?

Definition of borrower insurance

Borrower insurance contracts all include a guarantee death and disability and even job loss sometimes. The guarantee may be total or partial. This is the minimum required by the banking establishments with which you have contracted the credit.

When you want to take out a loan from a financing organization, in most situations, it is mandatory to take out loan insurance to ensure your credit. This last one is a guarantee for your family and yourself, it is also a guarantee for the lending establishment: in the event of death, incapacity or loss of work, it is the insurance that reimburses the lending establishment.

Borrower insurance guarantees

The coverage for any permanent disability may occur as a result of injury, illness, life or work incident.
the disability can be partial (between 33% and 66%) or permanent (more than 66%).
The death insurance guarantee is an essential condition for insurance related to the financing of real estate.

In the event of the subscriber’s death, the insurer pays the bank all at once the outstanding capital and interest at the rate corresponding to the day of death. This frees the family of the deceased while avoiding the seizure of the property.

The job loss coverage is the only optional guarantee of mortgage credit insurance, but it is still recommended. In the case of a loss of work of the borrower employed during the repayment of the loan, the insurance company pays the monthly payments in his place during a determined period or according to specific terms.

L’temporary disability insurance is an insurance that comes into play following a short illness or a claim resulting in total, but temporary, incapacity for work of the borrower. Like any type of loan, the insurance loan is governed by specific laws. The most recent are the Hamon, Lagarde and Bourquin laws:

  • the 2010 Lagarde law introduced the concept of insurance coordination;
  • the Hamon law authorized the transfer of borrower’s insurance free of charge (under certain conditions);
  • the Bourquin law modifies the Hamon law and authorizes a replacement or cancellation of the loan insurance at each expiry of the loan contracts.

Choosing borrower insurance

Your profile and your needs will define the specific characteristics you are looking for.

Once the profile has been established and the needs identified, make a comparison between the different borrower insurance offers.

Here is some points of comparison:

  • warranties, their scope and exclusions;
  • the terms of application of the contract (age limit, possible waiting periods, etc.);
  • the coverage rate, which is the percentage of the loan covered by the borrower insurance;
  • application fee ;
  • the cost of home loan insurance for the year and each month.

There are insurance comparators on the Internet to help you make your decision. It is also possible that your credit agency will suggest that you join the insurance contract previously concluded with an insurer to group insurance.

Favor the formula of the insurance delegationnamely concluding a contract with the insurer of your choice, is also an option.
When the latter offers the same level of cover as the insurance contract suggested by your credit institution, the latter will approve it after a thorough examination of your case.

Terminate your borrower insurance contract

You can cancel the loan insurance taken out during the 12 months following the conclusion of your credit proposal if you show proof of a loan insurance contract with a comparable level of coverage.
As you can cancel this insurance every year, the situation is identical to the previous one.

The only difference is that this possibility must be used two months before the expiry of the borrower insurance contract.

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