Borrower insurance (or loan/credit insurance) is a guarantee taken out to cover a loan , whether it is a mortgage or a consumer loan, in order to guarantee payment of the loan installments within the if the borrower is unable to repay the entire capital remaining due .
Thus, it allows:
- the lender to protect itself in the event of an unforeseen event that would make it impossible to repay the loan contracted;
- those around you to deal financially with an unforeseen event.
Is borrower insurance compulsory?
If mortgage loan insurance is not compulsory, no bank will agree to grant you a loan if you do not take out one, unless you have a solid heritage and put it as collateral.
What is borrower insurance for?
Borrower insurance guarantees coverage of all or part of the maturities of a loan in the following cases:
- Illness and Death;
- Total and irreversible loss of autonomy;
- Job Loss ;
- Temporary incapacity for work.
Note that if you are several co-borrowers, in the event of an unforeseen event, your share of the outstanding capital will be reimbursed up to the amount subscribed.
To be clear, if you take care of 60% of the monthly payments of a loan, then the borrower insurance will reimburse 60% of the remaining capital if something happens to you.
What do borrower insurance guarantees cover?
job loss
Borrower insurance covers dismissals when it comes to a termination of CDI, but not in the event of resignation, interruption of the trial period, partial unemployment, early retirement or termination of CDD.
Total and irreversible loss of autonomy and incapacity for work
In the event of total and permanent disability, the borrower’s insurance guarantees the repayment of the outstanding capital. In the event of partial incapacity, on the other hand, the coverage of your deadlines depends on:
- Your degree of disability and its coverage by your borrower insurance;
- The scope of the warranty;
- The age limit for paying monthly loan payments.
Hence the need to carefully compare the scope of the different borrower insurance offers before taking out one.
The death
As with total and permanent disability, in the event of death, the payment of the outstanding capital is covered by the borrower’s insurance.
What is borrower insurance delegation?
If 8 out of 10 borrowers take out the borrower insurance offered by their bank, they are no longer obliged to do so since the entry into force of the Lagarde Law in 2010. This allows the delegation of insurance, i.e. i.e. taking out your borrower insurance policy with a third-party establishment.
A measure that allows you to compete between insurers by comparing their offers in order to save on the cost of your credit.
What are the differences between group borrower insurance and individual insurance?
The main difference between group insurance and individual borrower insurance lies in the method of calculating the cost of borrower insurance.
- If you opt for the group contract offered by your bank, your borrower insurance rate will be defined by the establishment and calculated according to the capital borrowed. This is a standard contract offered under the same conditions to all the bank’s customers, hence its name.
The downside of group insurance is that it spreads the risks among all borrowers regardless of their age. This is why it can be very expensive if you are young and in good health.
- If you choose the delegation of borrower insurance , know that the cost of it being calculated according to the capital remaining due, it will be updated each year according to an amortization table. On the other hand, as it is an individual insurance, you can personalize it in order to adapt it to your profile.
If the banks still tend to be insistent, know that thanks to the Lagarde law, they can no longer condition a loan offer on the subscription of their borrower insurance.
You can now choose the offer that best suits your profile at the best price, provided that you take out the minimum guarantees required by the lending institution. To do this, you will need to make a comparison between borrower insurance , whether in terms of offers or in terms of prices offered by the different insurers.
How is the cost of borrower insurance calculated?
Whether you opt for a group offer or an individual offer, the calculation of the price of your borrower insurance is based on 4 main pricing criteria :
- The medical risk that you represent according to your age, your medical history, your state of health or your lifestyle. This is why any subscription to a loan insurance contract is accompanied by a health questionnaire to be completed.
- Occupational risk according to the type of contract and the job performed.
- Your way of life.
- The guaranteed capital, that is to say the amount you borrow.
On arrival, the price of your borrower insurance represents 5 to 30% of the final price of your mortgage . Hence the interest of integrating it into your financing plan and seeking the best value for money, through a loan insurance comparator .
How to choose the right borrower insurance: choose the best insurance according to your profile
To choose the right borrower insurance, you must take into account the specifics of your profile and your needs. To do this, analyze and establish a comparison between borrower insurance using these criteria:
- Warranties, their scope and exclusions;
- The terms of application of the contract (age limit, possible waiting periods, etc.);
- The quota. Also called coverage rate, this is the percentage of the loan covered by the borrower insurance;
- Application fee ;
- The cost of borrower’s insurance for the year and each month.
For the rest, take the time to study the mandatory guarantees according to your profile. It’s all about anticipation.
To find out which will be the best mortgage insurance for your profile, you can use our borrower insurance comparator , which can be found at the top and bottom of this page.
With our comparator, you will find insurers offering an offer that perfectly matches the guarantees you want. Then, you have the freedom to be called back directly by the insurer(s) of your choice, or to make your own borrower insurance comparison by asking to receive the various quotes offered by e-mail.
To change borrower insurance, you have two options:
- Thanks to the Hamon law, you can send a letter of cancellation of borrower insurance in order to stop your borrower insurance to choose a new one during the 12 months following the subscription of the contract;
- Thanks to the Sapin II law, otherwise known as the Bourquin law since the entry into force of the Bourquin amendment, all borrower insurance contracts signed after March 1, 2017 can be terminated annually. For the others, the annual termination has been effective since January 12, 2018.
- Thanks to the Lemoine law , at any time during and after the first year of loan!
One condition: your new borrower insurance must offer guarantees at least equivalent to those offered by your bank.
Why ask lesferets to compare your borrower insurance?
Making a comparison for both borrower insurance is quick and easy with lesferrets. To use our borrower insurance comparator or make a loan insurance comparison, fill out our form with some information about you and your loan. In just a few minutes, get the best borrower insurance adapted to your profile and your project, at the best price.
Frequently Asked Questions
⭐ How to choose your borrower insurance?
To find the borrower insurance best suited to your profile, simply use a borrower insurance simulator like the one we offer. Achievable in just a few minutes, it will bring together the most competitive offers on the market for you.
⭐ What is the price of borrower insurance?
The price of borrower insurance is calculated according to several elements related to the insured himself, such as:
- His health
- His age
- The type of loan concerned, its duration and its amount
- The risks he takes if he is a smoker, if he does extreme sports, if he travels for work, etc.
Note that in some cases, the cost of borrower insurance can represent up to a third of the total amount of the mortgage .
⭐ How to cancel your borrower insurance?
A termination request requires sending a termination letter by registered mail with acknowledgment of receipt to your insurance company.
Note that since January 1, 2018, the law allows you to change borrower insurance on each anniversary date of the contract . To do this, it will only be necessary to respect the condition of presenting a new contract which has the same level of guarantees.
