BORROWER INSURANCE. This Thursday, September 1, the termination at any time of your home loan insurance contract will be possible, and for all. All the details.
[Updated on August 31, 2022 at 08:44 a.m.] D-1 before the termination at any time of his loan insurance contract for all! Indeed, from this Thursday, September 1, 2022, it will be possible for borrowers whose contract is in progress to terminate it by playing the competition. For new contracts, this was already possible since April 1 under the Lemoine law. This week, no less than 7 million policyholders will be able to do the same, and benefit from more attractive prices by comparing offers from all insurers in the network.
The Lemoine law does not stop there. In fact, it also endorses the end of the medical questionnaire for loans of less than 200,000 euros, and 400,000 euros for a couple. A device valid if the maturity of the loan is scheduled before the 60th birthday of the insured. Finally, the reduction of the right to be forgotten from 10 to 5 years is also planned. Have you completed your treatment for cancer or hepatitis C and are you in remission? Double "good news", the reduction of the right to be forgotten has also been adopted! You will only have to wait 5 years after your remission to no longer have to declare it to your insurer, compared to 10 years until then.
Individual or group insurance contract for real estate loans, borrower insurance guarantees the repayment of a loan. This insurance is both a security for the people who borrow, as well as for the lending organization, in particular the banks. Borrower insurance covers the payment of all or part of the repayment installments of the outstanding credit when you are in certain situations such as permanent disability, loss of your job or even death.
Borrower insurance is a security for both parties: it covers the insured (in whole or in part) in the event of difficulties in paying the monthly installments of the credit, on the other hand it protects the financial institution which will be compensated in the event default by the insured.
Be aware that before making you a home loan offer, the bank may require that you obtain borrower insurance. The bank sets the minimum guarantees (example: death, disability). It then makes an estimate of the cost of insuring your future credit. But you can go to another insurer. Borrower insurance covers the payment of all or part of the repayment installments of the outstanding credit when you are in certain situations such as death or permanent disability.
The termination at any time of borrower insurance came into force on Wednesday June 1, 2022. A small revolution in the world of mortgage loan insurance, a sector more than 88% owned by banks. From now on, you are free to compete to obtain a more attractive rate at any time of the year. No more waiting for the anniversary date of the contract. You are free to make your choice.
The Lemoine law was adopted in February 2022 and facilitates access to mortgages. People who present a serious health risk will now have a better chance of taking out one. It allows the right to terminate your borrower insurance contract at any time, for all, and free of charge for individuals who have taken out a mortgage for mixed residential use. It also guarantees the right to be forgotten (explanation below) and removes the medical questionnaire.
Parliament adopted on Thursday, February 17, 2022 the termination of the borrower insurance at any time. In other words, a borrower can now terminate his mortgage contract at any time, while he was obliged to wait for the anniversary date until then. The goal? Create greater competition to drive down costs for consumers. The date of entry into force of this termination at any time of the borrower insurance is known, June 1, 2022 for new contracts, September 1 for current contracts.
It does not stop there, insurers now have, with this reform, the obligation to reinforce the information with regard to borrowers concerning their right to terminate before the anniversary date of their contract. In addition, all of the reasons for refusal will now have to be explained and communicated to borrowers, once a termination is refused. A big blow, especially for banking establishments which hold 88% of this juicy market. In the future, the banks will have to share the cake.
The rate of borrower insurance varies greatly from one contract to another, depending on the amount borrowed, the duration of the contract, but also the age and state of health of the borrower. The Effective Annual Rate of Insurance (AAER) represents the cost of borrower insurance, as a percentage of the total amount of the mortgage. For example, a rate of 0.5% represents an annual contribution cost of 0.5% of the capital borrowed (and not of the capital remaining to be repaid). Here is an estimate of the mortgage loan insurance rates applied according to the profile of the borrower, according to the broker Empruntis:
Want to know your borrowing capacity based on interest rates? Go to the Public Service website to find out your potential mortgage, the amount of your borrower insurance, the duration of the loan and the monthly payments you want. You will find the form right here.
Unlike car insurance or home insurance, home loan insurance is not compulsory. But in fact, it is systematically required by the lender granting you a mortgage. If you wish to escape this insurance, you can pledge your property, but this is generally only accepted for borrowers with high assets.
When the insurance is optional, depending on the amount borrowed and the repayment period, the borrower may have an interest in taking it out in order to be able to repay his monthly payments in the event of an accident in life.
The medical questionnaire was a central issue during the lively debates between deputies and senators. From now on, the medical questionnaire will be abolished for loans of less than 200,000 euros, up to 400,000 euros for a couple. Please note that this new measure will only apply if, and only if, the maturity of the loan is scheduled before the insured's 60th birthday.
This new measure represents significant progress for all patients suffering from cancer, mental or respiratory pathologies, among others. Before the reform, these borrowers were obliged to declare their illness, which necessarily generated a significant increase in the amount of their insurance. It is now ancient history with this removal of the medical questionnaire, which more than half of borrowers would be concerned.
Have you completed your treatment for cancer or hepatitis C and are you in remission? Double good news, the reduction of the right to be forgotten has also been adopted! You will only have to wait 5 years after your remission to no longer have to declare it to your insurer. Previously, this period was 10 years. It is therefore halved as part of the borrower insurance reform. The period during which additional costs can be charged to the policyholder is therefore much shorter, which should enable policyholders to save money.
Borrower insurance mainly covers three types of risks: the risk of death, the risk of disability and the risk of job loss. In the event of the death of the insured, the insurer reimburses the remaining capital to the financial institution. The disability guarantee "may relate to functional disability, the inability to exercise a professional activity or the total and irreversible loss of autonomy", specifies the French Insurance Federation. In this case, the insurer reimburses all or part of the remaining capital according to the contract taken out by the insured. There is also a guarantee against the loss of a job. Depending on your contract, the insurer will reimburse all or part of the remaining capital to the financial institution.
The bank with which you take out a loan usually offers you a borrower's insurance contract. If subscribing to this contract is convenient, it is not necessarily the best financial solution.
Another solution is to choose a contract yourself from an insurer. This is called delegation of insurance. By this means, it is possible to obtain a more interesting contract. Important detail, if you choose this route the contract "presented [to the credit institution] must present a level of guarantee equivalent to the insurance contract offered by the credit organization", recalls the French Federation of Insurance. If this is the case, the financial institution in which you took out your loan will not be able to refuse it.
During the progress of your loan file, the credit institution generally gives you a standardized information sheet (FSI). "This sheet presents in particular the insurance guarantees required by the credit organization for the granting of a loan, as well as a quantified example of the cost of insurance", explains the French Insurance Federation. This standard form precedes the delivery of a personalized form linked to your credit file.
The personalized sheet is essential if you choose another insurer than the one offered by your financial institution. It will allow you to compare the offers and ensure that the level of insurance is similar between the contract to which you subscribe and that offered by the financial institution. Once the borrower insurance has been taken out, you will have to submit the insurer's file to the credit institution so that it can validate the contract.
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