Home loan insurance (or borrower insurance) allows the bank to guarantee the correct payment of the monthly installments of a home loan. It also protects the borrower in the event of death, illness or accident. Home loan insurance has a significant cost, so it is essential to understand it well before building your house. Maisons SIC, a specialist in house construction for over 50 years, provides you with information on this (almost) compulsory insurance.
Home loan insurance: usefulness and guarantees?
Home loan insurance is a key element in financing a real estate project. Although it is not strictly mandatory, it is required by the majority of banks. It protects the borrower and the lender in the event of an unforeseen event.
The teams of Maisons SIC can give you advice on this matter, do not hesitate to contact us!
Is borrower insurance compulsory?
Mortgage insurance is not required by law. However, in practice, no bank grants a loan without borrower insurance. It guarantees the reimbursement of the remaining capital due in the event of death, disability or incapacity.
Concretely, If a serious event occurs, the insurance takes over. This avoids leaving the financial burden to your loved ones or risking the seizure of the property. Insurance is therefore a security for both the borrower and the bank.
When should you choose your credit insurance when building a house?
Choosing your home loan insurance is essential before signing the loan offer.
You have two options: accept the insurance offered by your bank or look for an external contract. This is called insurance delegation.
Compare multiple offers can save you significant money. In fact, insurance that is tailored to your profile can be cheaper and offer better guarantees.
Don't delay, because insurance is often conditional on obtaining your loan. Also consider tailor your coverage to your needs.
The different guarantees of mortgage insurance
Borrower insurance is based on several guarantees. Some are imposed by the bank, others are optional depending on your real estate project. Here are 4 of the main guarantees.
Death and PTIA (Total and Irreversible Loss of Autonomy) Guarantee
In the event of death or total incapacity, the insurer reimburses all or part of the remaining capital due. This is the basic guarantee required by all banks.
ITT and IPT (Total Temporary Disability and Total Permanent Disability) guarantees
They cover monthly payments in the event of work stoppage or disability of more than 66%. The coverage is limited in time, so check the conditions carefully.
IPP (Permanent Partial Disability) Guarantee
This guarantee applies if the disability is between 33% and 66%. It allows partial coverage of monthly payments.
Loss of Employment Guarantee
Optional, it concerns employees on permanent contracts who are dismissed (except for serious misconduct). Although useful, it is costly and often limited in time.
Before taking out mortgage insurance, compare the guarantees required and adapted to your profile. Conditions vary between banks and insurers. If you change your insurance, make sure you keep equivalent guarantees.
How to benefit from “good” mortgage insurance?
To obtain advantageous mortgage insurance, it is essential to be vigilant on several criteria and to carefully compare the available offers.
Compare contracts and study guarantees
Take the time to analyze the guarantees included in each contract. Some mandatory coverages, such as death or PTIA (Total and Irreversible Loss of Autonomy) guarantees, are imposed by the bank.
However, ITT (Total Temporary Disability) or loss of employment guarantees may be optional. Make sure you choose only those that match your personal situation.
Also do Beware of warranty exclusions : some risky activities or previous illnesses may not be covered. Finally, compare the waiting periods and deductibles, as they can impact coverage.
Evaluate the cost and pricing method
The cost of mortgage insurance varies depending on the insurer and the type of pricing:
- On the initial capital : contributions remain fixed throughout the loan.
- On the remaining capital due : they decrease over the course of reimbursements.
To optimize your choice, compare the total cost of the insurance over the expected duration of the loan.
Pay attention to the quantity
The quota represents the portion of the loan insured. It must be at least 100%, but can be split between co-borrowers. A 200% share (100% each) provides maximum protection, but increases the overall cost.
Finally, do not hesitate to use insurance delegation to take out a contract more suited to your needs and make savings.
How and why change your home loan insurance?
Changing your mortgage insurance allows you to: achieve significant savings while adapting the guarantees to your needs.
Since the Hamon law and the Lemoine law, you can cancel your insurance contract at any time (without waiting for the anniversary date) to choose a more advantageous one.
- Also read: 4 tips for getting a good mortgage
Why change insurance?
- Save money : External insurance can be up to 50% cheaper than group insurance offered by the bank.
- Benefit from better guarantees : Adapt your coverage to your situation (risky job, health, etc.).
- Optimize your protection : Opt for less strict exclusions or a flat-rate reimbursement rather than compensation.
How to proceed ?
- Compare offers : Analyze rates, guarantees, exclusions and waiting periods.
- Respect the equivalence of guarantees : The new contract must offer at least the same guarantees as the old one.
- Submit your inquiry : Present your new contract to your bank. They have 10 days to validate it.
How to lower your home loan insurance rate?
As 2024 dawns: are savings possible? Yes, it is entirely possible for borrowers to lower the rate of their mortgage insurance and thus make significant savings. Borrower insurance, often imposed by banks when obtaining a mortgage, can weigh heavily in the total cost of financing.
To reduce this rate, it is advisable to negotiate with your bank when taking out the loan and not to hesitate to take advantage of insurance delegation. Since the Lemoine law of 2022, changing insurance at any time free of charge has become a practical solution for obtaining a contract with equivalent guarantees at a lower cost.
he is also essential to adapt the guarantees to your profile : some coverages may be unnecessary, especially in the context of a rental investment where only death and PTIA (Total and Irreversible Loss of Autonomy) guarantees are often required. Comparing offers by analyzing the APR (Annual Effective Insurance Rate) also allows you to play the competition to find the best offer.
Otherwise, Improving your lifestyle can play a key role. Borrowers considered to be at risk, such as smokers or overweight people, often face additional premiums. Adopting a healthier lifestyle can therefore entitle them to significant reductions.
Finally, he is important to regularly review your insurance contract to ensure that it remains adapted to their needs and to optimize the distribution of the insurance portion, especially in the case of a loan with two borrowers.
By adjusting each parameter and remaining vigilant about market opportunities, it is possible to significantly reduce the cost of borrower insurance.
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Maisons SIC can advise you on your mortgage insurance: contact our teams!
