Real estate loan insurance, credit insurance or borrower insurance mean the same intention: to protect the bank but also the property of the borrower of a possible unpaid in case of death, accident or loss job.
Required because of the amount of capital lent, it increases the total cost of credit to the extent that it is calculated over its entire life. It can thus reach up to 40% of the amount borrowed. Not really a good deal right now because of the very low interest rates.
What does the cost of insurance really represent?
The insurance rate is added to the money rate, depending on the insurances between 0.20% and 0.60%. Insurers rely on the age of the borrower, his state of health, the particular risks he is exposed to because of his job or sports at risk, and the duration of the mortgage.
In addition, exclusions are provided in the contract to discard the insurer from any compensation.
Can one choose one’s insurance?
The bank granting the home loan will offer group insurance with identical rates and guarantees for all subscribers. Since the Lagarde law in 2010 then the Hamon law in 2014 and finally the Sapin II law in 2017, the delegation of insurance allows the borrower to choose his insurer himself. It has the opportunity to subscribe personalized guarantees and to play the competition, with real savings to the key.
Specifically, these laws require the bank to provide the borrower with a requirements sheet describing the guarantees offered, the rate and the overall cost of insurance of the mortgage. He is also entitled to refuse the credit if the guarantees are not similar.
Price is not the only criterion of comparison. The protection must at least include:
- the death ;
- the total and irreversible loss of autonomy (PTIA);
- permanent and total disability (IPT);
- permanent and partial disability (IPP).
If the borrower exercises a liberal profession, he will be interested in taking out an IP Pro (professional disability) guarantee provided that the contract specifies that the disability prevents him from practicing “his profession” and not “any professional activity”, in which case he would not be compensated.