BORROWER INSURANCE 2022. The Lemoine law allows the termination of loan insurance at any time and for everyone. When ? What reforms? We take stock.
[Mis à jour le 26 août 2022 à 09h46] Starting the September 1, 2022, the termination at any time of a borrower’s insurance contract will be possible, for all! Indeed, thanks to the new Lemoine law, all borrowers who have signed a loan contract before June 1 will be able to terminate it at their discretion. Only one condition persists: find an offer with at least equivalent guarantees. Another notable development is 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.
Since June 1, 2022, a borrower is free to break his borrower insurance contract at any time and to compete. Impossible until then, it was necessary to wait for the anniversary date of the contract to change insurer. From now on, you are free to compare the offers more quietly and to terminate your loan insurance contract whenever you want. This advance is effective from June 1, 2022 for new contracts, and from September 1 for current contracts.
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 deadlines for 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 of default by the insured.
Know that before you make an offer of home loan, 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 contract anniversary date. 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 real estate loan for mixed residential use. It also guarantees the right to be forgotten (explanation below) and removes the medical questionnaire.
Parliament adopted on Thursday 17 February 2022 the termination of 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, the June 1, 2022 for new contractsthe September 1st for current contracts.
It does not stop there, insurers now have, with this reform, the obligation to reinforce information with regard to borrowers regarding their right to terminate before the anniversary date of their contract. In addition, all of the grounds for refusal will now have to be explained and press releases to borrowers, as soon as a termination is refused. A big blow, in particular for the 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 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% |
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.
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.
The medical questionnaire was a central issue during the lively debates between deputies and senators. Now the medical questionnaire will be deleted for loans of less than €200,000until €400,000 for a couple. Please note that this new measure will only apply if, and only if, the maturity of the loan is scheduled before 60th birthday of the insured.
This new measure represents significant progress for all patients suffering from pathologies cancerous, psychic Where respiratory, 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.
You have completed your treatment against a cancer or facing theHepatitis C and you are in remission ? Double good news, the reduced right to be forgotten was also adopted! You won’t have to wait any longer 5 years after your remission so that you no longer have to declare it to your insurer. Previously, this time 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 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.
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.