Taking out borrower’s insurance is not a legal obligation, but credit institutions do require it. The cost of this insurance can represent more than a third of the amount of the loan, so it is essential to choose the contract that suits you based on relevant criteria. So, how do you choose your loan insurance?
Which loan insurance should I choose?
You have two options: sign the contract proposed by the bank or turn to a third-party insurer.
Bank loan insurance
Loan insurance is automatically included in the simulation carried out by your advisor. It is therefore a partner insurer or a subsidiary of the financial institution that covers your loan. The guarantees are pooled to adapt to different borrower profiles.
While this is a practical solution in the sense that you do not have to look for and compare other offers, there is a risk of paying high premiums and not having access to cover that suits you.
Individual loan insurance
As the name suggests, these insurance policies can be tailored to your needs and profile. There are no restrictions on the choice of insurer. However, the contract must offer guarantees at least equivalent to those required by the bank.
Whether you initially chose a group contract with the bank or an individual contract, you can change insurer during the course of the loan thanks to the Hamon law and the Bourquin amendment.
What guarantees are offered?
The guarantees associated with loan insurance must be carefully studied. TILA (Total and Irreversible Loss of Autonomy) and death cover are compulsory as they are major risks.
Permanent Total Disability, Permanent Partial Disability and Temporary Work Disability cover, respectively abbreviated as IPT, IPP and ITT, are optional but required for main residences. However, it is strongly recommended that you include them in your policy to protect you if an illness or accident that prevents you from carrying out professional activities occurs during the payment of your loan instalments. The insurance can then take over your monthly payments according to the conditions (duration, amount, etc.) stipulated in the contract.
Do not hesitate to ask the insurer about other guarantees that may be available.
In all cases, find out about exclusions in detail. These are situations in which the guarantees cannot operate.
How much does loan insurance cost?
The amount of loan insurance can be calculated using two methods:
- If the insurer chooses to base the policy on the initial capital, you pay constant premiums until the last repayment date.
- If the premiums are calculated on the basis of the outstanding capital, they vary according to a predefined schedule.
The method of calculation can lead to significant differences, especially on the first monthly payments. In most cases, group insurances are based on the initial capital and individual insurances are calculated on the outstanding capital.
The price also depends on your medical profile, the risks inherent in your profession and the risky activities you engage in as a hobby. A surcharge may apply.
Waiting period and excess
The waiting period is the period between the date of signing the contract and the date on which you can actually receive compensation. Depending on the type of loan insurance chosen, the waiting period may be zero or may extend to 12 months.
The deductible period is the period between the event requiring compensation and the insurer’s acceptance of the claim. The insurer generally allows a period of time to verify the circumstances that led to an accident, loss of employment, etc. before intervening.
Using a brokerage firm to choose your loan insurance
A few years ago, it was necessary to go round several institutions to submit the same application. It goes without saying that proposals were slow to come in, which delayed comparisons and made it difficult to choose loan insurance.
Today, you can simply go through changersonprêtd’assurance for example to choose your loan insurance. You provide the information that enables your borrower profile to be drawn up by filling in an online form, and the broker uses his network. You will receive several offers at competitive rates, the proposals being drawn up according to your profile.
When changing insurers, remember to specify the cover offered by the bank (or by the current insurer).
Choosing a loan insurance policy therefore requires a precise assessment of your needs and the comparison of several offers. Make your life easier by using a broker who can offer you telephone and/or online assistance.
To help you in your efforts, you should be accompanied by a good lawyer.