BORROWER INSURANCE. In the small papers for some time, the termination at any time of the borrower insurance is about to be adopted.
[Mis à jour le 4 février 2022 à 17h09] This is great news for borrowers’ wallets. Deputies and senators met this Thursday, February 3 at the National Assembly in a Joint Joint Committee concerning a bill on borrower insurance. Stakes ? The termination at any time of the borrower insurance. This project is on the right track, and in all likelihood should be effective in the coming weeks.
Indeed, it should no longer be necessary to wait for the birthday of the borrower’s insurance contract to create competition, and change insurers. Hard to swallow for the banking establishments which hold this market at 88% and who will have to share. The latter will also have to strengthen their obligation to inform towards customers on their rights to terminate before the anniversary date of the contract. The removal of medical questionnaire is also at stake, in the same way as a reduced right to be forgotten for some cancerous pathologies.
Next step for this bill, a vote in the National Assembly on February 10. Then the February 17 in the Senate. A path at the end of which, without much surprise, the bill should be adopted.
Borrower insurance is a contract taken out as security for a loan (real estate, Consumer credit…) If this is not mandatory, it is often required by financial institutions. It mainly covers temporary or permanent incapacity for work, loss of employment, disability 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 of default by the insured.
Borrower insurance mainly covers three types of risk: the risk of death, the risk of disability and the risk of job loss. In case of death of the insured, the insurer reimburses the remaining capital to the financial institution. Warranty disability “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.
Unlike car insurance or Home Insurance, home loan insurance is not not mandatory. 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 subscribing to it in order to be able to repay his monthly payments in the event ofaccident of life.
Do you want to know your borrowing capacity according to interest rates? Visit the website of Public service to know your potential mortgage, the amount of your borrower insurance, the duration of the credit as well as the desired monthly payments. You will find the right form here.
Until then, a bank could ask a borrower to provide it with a medical questionnaire to confirm their health. It’s over ! In fact, banking institutions will no longer be authorized to request this medical questionnaire when a borrower wishes to take out a home loan for loans of less than €200,000. De facto, the amount of the mortgage doubles and amounts to 400,000 euros when the purchase is made as a couple. A loan that must be repaid before reaching the 60-year mark.
We should also specify the reduction of the right to be forgotten for, from 10 years to 5 years. The right to be forgotten allows you not to mention certain cancers on your health questionnaire submitted by the insurer if your pathology was diagnosed before you turned 21 with a therapeutic protocol completed 5 years ago and without relapse. Or, after your 21st birthday, with a therapeutic protocol completed 10 years ago, with no observed relapse.
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 Insurance Rate (TAEA) 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:
| Borrower profile | Mortgage loan insurance rates |
|---|---|
| 20 years non-smoker | 0.05% |
| 20 year old smoker | 0.08% |
| 30 years non-smoker | 0.09% |
| 30 years old smoker | 0.13% |
| 40 years old non-smoker | 0.17% |
| 40 year old smoker | 0.25% |
| 50 years old non-smoker | 0.31% |
| 50 year old smoker | 0.33% |
The bank with which you take out a loan generally offers you a borrower 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. It’s called delegation of insurance.. By this means, it is possible to obtain a more interesting contract. Important detail, if you choose this way the contract “presented [à l’établissement de crédit] must present a level of guarantee equivalent to the insurance contract offered by the credit institution”, reminds the French Insurance Federation. 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 Federation of insurance. This standard form precedes the delivery of a personalized file 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.
Since January 1, 2018 and theBourquin amendment, all borrower insurance contracts can be terminated each year, regardless of the subscription date. Please note that certain sine qua non conditions persist. Without them, the lender will not accept the cancellation of your insurance. Here they are :
- The guarantees must remain at the same level.
- The bank or the lending organization must have signified its agreement, by a written document.
- The notice of termination is two months before the annual expiry date of the borrower’s insurance.
What are the procedures? It is mandatory to write a registered letter with acknowledgment of receipt to terminate your borrower insurance, to be sent to the insurer, whether it is the lender itself or not. You will just find here a model of termination letter of your borrower insurance.
During the first year of the contract, the consumer can change insurance at any time (at the latest 15 days before the end of the 12 months). After the first year, he must wait for the expiry date of the contract. He can then change insurance each year, for the duration of his loan. Please note: the maturity date does not always correspond to the anniversary date of the contract. It is always indicated in the general conditions of the loan.