When you take out a home loan, your banker will probably talk to you about home loan insurance. Your banker can request it from you for a zero-interest loan, a bridging loan, or any other type of real estate loan.
You may hear and read that this insurance is mandatory, which is not the case. In this file, we will provide you with several information on this subject and present to you whether it is essential for your loan.
Is it mandatory?
When you take out a home loan and talk about home loan insurance or the corresponding borrower insurance, you wonder if it is mandatory. We would like to point out that unlike car insurance or home insurance, it is not legally compulsory, but certain banks and financial establishments may require it from you.
Since 2010 with the entry into force of the Lagarde law, you are not obliged to take the insurance offer proposed by your lender, which gives you a free choice of the credit insurance that suits you, and this, from another establishment. In certain cases, particularly those who have significant assets, it is possible to circumvent this mortgage loan insurance obligation by putting your property as security
What is it for?
If certain banks or financial institutions require real estate credit insurance, it is to protect themselves against any failure to repay their clients. It should be noted that this insurance does not only protect the lending organization, but it also covers the credit subscriber.
On the one hand, this insurance will be a guarantee for the banker that he will be reimbursed, and on the other hand, the borrower will be insured against various events>. Indeed, the insurance offers the possibility of taking charge of the partial or full repayment of the loan if the borrower cannot do so following death, illness, disability, or loss of employment.< /span>
Choosing your property credit insurance
To have a property loan, borrower insurance may be compulsory. Your application may be directly refused if you do not present the credit insurance contract. To take out this type of insurance, you can take the offer offered by the lending organization or by an insurance company.
The offer proposed by the lending organization is group insurance. The latter is governed by a collective contract where each insured person obtains insurance dedicated to their loan. Many borrowers turn to this option because group insurance is offered at an attractive price. The cost is significantly lower and the contract works on the same principle as risk pooling.
However, pricing may vary depending on the age of the subscriber: seniors pay more than young people. Please note, however, that not everyone can obtain this real estate credit insurance offered by the lending organization. To have it, you must meet the criteria imposed by the organization and answer a loan insurance questionnaire. In some cases, the organization may even ask you to undergo a medical examination.
If the insurance contract offered by your banker does not suit you, you can take out personal real estate credit insurance. The latter can be taken out with an insurance company. The advantage of this second option lies in the fact that the offer is tailor-made: it is adapted to your situation while meeting the requirements of the lending organization. The price to pay is calculated according to the risk of non-repayment presented by the borrower as well as the levels of guarantees he wants to have. a>
Risks covered by real estate credit insurance
Whether with your banker or your insurance company, you must see the risks covered by the insurance offered. Most of the time, the home loan insurance contract includes a death and disability guarantee. If the borrower dies or becomes permanently or permanently disabled following an event, the insurer takes care of the reimbursement of the remaining capital.
In this case, it is not just the bank or the lending organization that is protected, because the borrower and his family will also be protected. We can also offer you a job loss guarantee in an individual contract. However, this guarantee is quite restrictive, because it is only granted to borrowers who have a job with a permanent contract.
You will not have help from your insurer if you resign from your job or if you are dismissed for serious misconduct. Please note that this guarantee does not ensure full repayment of the loan. You can also request a guarantee covering health risks for this home loan insurance contract. To obtain it, the insurance company will ask you to complete a medical questionnaire. Some insurance companies may refuse this guarantee if you are one of the people with serious health problems. In this case, you can take advantage of the advantages of the AERAS convention.
The medical questionnaire linked to health risk coverage
The questions asked on this form will allow the insurance company to assess your state of health. You must complete it in good faith and do not hide any information from your insurer.
An omission of information or a false declaration may result in forfeiture of guarantees. With the answers you have given, the insurance company will be able to determine the guarantees for which it offers coverage, the conditions for having its support, the exclusions as well as the amount of the monthly contribution to be paid.
The criteria to take into account when choosing the insurance contract
Even if you find the home loan insurance offer offered by your banker advantageous, you should not rely solely on the monthly contribution for your choice.
Of course, this contribution will weigh heavily on your budget with the monthly payment of your loan, but you must also consider other criteria, including the guarantees offered. To do this, you will need to refer to your situation; certain clauses may seem unnecessary to you. This contract also includes a waiting period.
This corresponds to the period following the signing of your contract during which you will not be able to receive compensation. For your home loan insurance contract, you must not confuse the waiting period and the excess.
The latter is the period during which you will not be compensated. For each clause, you must ask your insurer for the exclusions and the method of compensation. Exclusions are situations for which you will not be able to benefit from coverage. Indeed, even if you have job loss coverage, compensation may be refused if you are dismissed for serious misconduct.
Also note that even if your monthly payment is very high, this does not always mean that your insurer will offer you a full refund. However, there are cases where you will be able to receive a full refund. If you obtain a partial reimbursement, the insurance company also provides in the contract a maximum duration of compensation.
This means that you will not always have financial support until the end of your mortgage repayment. The elements mentioned above should be checked before taking out borrower insurance and even if you have confidence in your banker, the offer he offers you is not always the best.
If you have 15 or 20 years of credit, your situation may go through ups and downs. It may then happen that the home loan insurance contract that you signed at the start of your loan no longer suits you after a few years. In this case, you can perfectly change your contract.