Real estate loan insurance
When you subscribe to a long-term loan, as is the case for a mortgage, loan insurance is required to obtain your mortgage. These guarantees allow the bank to guard against a default of payment but they also protect the borrower in case of a hard blow. Few banks will take the risk of granting you a long-term loan without collateral.
Guarantees of loan insurance
In the case of a mortgage, some guarantees are mandatory, others optional:
The death insurance is mandatory: in the event of death, the insurance company transfers all the outstanding capital to the lender. The heirs do not bear the debt. This guarantee is very often grouped with a guarantee total and irreversible loss of autonomy.
Other guarantees are optional but strongly recommended, always in the context of a mortgage:
- the total or partial incapacity for work guarantee allows the payment of the monthly payments when the insured can no longer exercise his professional activity temporarily, totally (sick leave) or partial (work within the framework of a therapeutic half-time).
- the total or partial permanent invalidity guarantee allows the payment of the monthly payments when the insured can no longer exercise his professional activity permanently, totally or patricially.
- The unemployment benefit or loss of employment ensures the payment of your monthly payments, in whole or in part, in case of unemployment.
How does this loan insurance work?
The mortgage insurance is underwritten by an insurance company. After completing a questionnaire about your health status, your family history, your activities, professional and sports, insurance can assess your ability to benefit from the guarantees.
Since the Lagarde law of 2010, you are free to choose the insurance of your loan if it includes guarantees equivalent to the contract of the bank.
So do not hesitate, dissociate the insurance of your loan from the credit itself: this is the key to optimizing the cost of your mortgage!
The case of other credits
With regard to a consumer credit, such as a car loan, a work credit, or a travel credit, loan insurance is optional. The guarantees offered under these credits are the same as for the mortgage loan. The borrower can choose all or part of these guarantees. If he chooses to be covered for all risks (death / permanent disability, partial disability, temporary incapacity for work and loss of employment) the cost of credit insurance will be all the more important.
The cost of borrower insurance
The price of credit insurance can be presented in different ways (monthly rate, annual rate, percentage of the amount to be insured, etc.). Also, when you set up loan insurance quotes, the best way to compare the cost is to look at the total premium you will have to pay in euros over the total loan period.
Depending on the options chosen, the cost of credit insurance can vary from 0.10% to 0.65% for the most expensive offers.