With a project that weighs on average 30% of the family’s income for 20 years, becoming a homeowner is an important step in life. But while homeowners place a lot of importance on negotiating the credit rate when buying real estate, loan insurance is still too often overlooked by borrowers.
However, this insurance is essential for two reasons: it generally represents more than a third of the total cost of credit and can be decisive in the event of a hard blow.
What is borrower insurance?
When signing a mortgage, banks systematically require borrower insurance, also called loan insurance. It is a guarantee for the borrower and for his lending bank. It ensures the proper repayment of the loan in the event of the death of the borrower or in the event of incapacity for work / disability. Borrower insurance must, at a minimum, cover Death / PTIA guarantees (Total and Irreversible Loss of Autonomy) but also, very often, so-called optional guarantees (incapacity and invalidity).
More than a third of the cost of mortgage loans
When negotiating a mortgage, banks systematically offer their borrower insurance contract, which often represents more than a third of the total cost of the loan. By opting for external loan insurance with an equivalent level of guarantees, a couple in their thirties can save € 10,000 (1) over the life of their loan. This saving represents the equivalent of 0.5% of the credit rate!
It is therefore understandable that choosing the right insurance is more effective than negotiating only the credit rate. But, faced with their bank, homeowners often have difficulty asserting their right to take out the loan insurance of their choice both when negotiating the credit and once it is in place.
The main thing is to choose
Even if banks systematically offer their borrower insurance contract, borrowers remain free to choose their loan insurance , whether before signing the loan or throughout the loan (see box). This is called delegation of insurance. The only obligation for the borrower is to present an insurance contract with a level of guarantees equivalent to that offered by the bank . To assess this equivalence of guarantees, banks and insurers base themselves on the criteria grid of the CCSF (Advisory Committee of the Financial Sector) which serves as a reference for any change in loan insurance. At Macif, it’s even simpler, we have created the guarantee equivalence certificate (2). Our contracts offer very good guarantees and, in addition, they automatically adapt to bank guarantees. Thus, choosing external insurance from an expert like Macif, allows you to make significant savings while being sure to be well insured.
Rights and duties of the bank
Loan insurance is a security for the insured and his family since it will take care of the repayment of the mortgage in the event of a hard blow (death, disability, etc.). It is also a guarantee for the bank and, once you have signed up, you cannot cancel your insurance without offering them an alternative.
On the other hand, as soon as there is an equivalence of guarantees between the contracts, the bank cannot oppose the substitution of your loan insurance. In addition, the bank cannot penalize the borrowerto choose an external insurance, by modifying the interest rate and / or by making him pay administration fees or other penalties. The law prohibits any practice of this type in order to guarantee buyers freedom of choice.