Save money on your loan insurance
Is mortgage loan insurance mandatory?
When a mortgage loan, the bank requires insurance to be protected in the event of death, disability, or stoppage of work of the borrower.
But is borrower insurance mandatory when taking out a home loan?
Can you freely choose your contract?
What are the optional guarantees?
According to the legislation in force, no, the subscription of borrower insurance is not compulsory.
But in fact, yes, it is required by all banks when signing a mortgage. This insurance protects the lender in the event of death, disability or prolonged sick leave of the insured.
Banking institutions, in fact, condition the mortgage on the prior subscription of borrower insurance.
This makes it very difficult, if not impossible, to get a mortgage without insurance.
It is for this reason that home loan insurance is said to be compulsory, although no law requires it.
Sometimes loan insurance is not requested, but this only applies to a few special cases, especially very large loans.
The bank will then offer the pledge of a life insurance contract or a mortgage.
While loan insurance is not required by law, in reality it will be very difficult for you to get a loan without it.
However, you have to choose it well because it represents an additional cost to your loan and its guarantees must properly cover you.
Do we have to choose insurance from the bank?
It is not mandatory to take out loan insurance from the bank. The law allows you to take out a loan insurance contract outside your bank. Thanks to the Lagarde and Hamon laws and the Bourquin amendment, you can call on a more competitive outside company. Many insurers offer attractive contracts. For the same level of guarantees, the savings can be -50%.
Three legal provisions therefore allow you to refuse the bank's insurance and to take out external, more competitive insurance.
Depending on your situation, you may benefit from one of the following 3 devices:
- The Lagarde law (2010) allows you to delegate your borrower insurance, that is to say to choose an insurance freely, apart from that offered by the lending bank. This choice can be made as soon as the loan contract is signed. In this case, you should sign an insurance contract just before signing the loan offer. If so, the bank is prohibited from refusing it and changing its interest rate. You are, in fact, required to take out borrower insurance, but you are not required to purchase that from your bank.
- The Hamon law (2014) allows a borrower insurance contract to be changed after signing the loan contract, at any time within one year.
- The Bourquin amendment (2018) strengthened the scope of the Hamon law. This amendment, in force since January 1, 2018, concerns all current real estate loans, and in particular, those over one year that can no longer resort to the Hamon law. It allows you to change loan insurance each year for the duration of your loan. This change is made either on your credit anniversary date or on December 31. It all depends on your insurance contract.
The sole purpose of these three legal devices is to facilitate access to homeownership by lowering the cost of borrowing.
The savings easily amount to € 10,000 on a switch, and consumers are turning to it more and more. The legislator's bet is therefore a successful bet.
What are the mandatory and optional guarantees?
Home loan insurance taken out with your loan may include different guarantees. These differ according to the destination of your purchase, and according to your bank.
- Whether it is a rental purchase or a second home, the guarantees required are limited because the bank will consider that in the event of default by the borrower, the rents may cover the monthly loan payments. These guarantees will not depend, here, on your chosen bank but only on the destination of your property
- If it is the purchase of a primary residence, the number of guarantees required is greater and they will depend on the bank you choose. Some banks require, for example, back and psychiatric guarantees, while others do not.
The number of guarantees will increase the cost of the insurance (on average by double the DC-PTIA guarantees and DC-PTIA-IPT-ITT guarantees).
Below are the guarantees requested according to your situation.
Here are the mandatory guarantees in all cases:
- Death guarantee.
- PTIA warranty.
Here are the mandatory guarantees for the purchase of a primary residence:
- Total Permanent Disability Guarantee (IPT).
- Lost Time Guarantee (ITT) with a 90-day deductible.
Here are the optional guarantees, required by your bank:
- Partial Permanent Disability Guarantee (PPI) to supplement the IPT guarantee.
- Job loss guarantee (very rarely requested and very expensive).
Is it compulsory to insure my mortgage?
According to the law, it is not mandatory to insure your loan. However, rare are the lenders who will agree to grant you a loan without insurance.
Am I required to take out insurance from the lending bank?
Absolutely not, you can completely refuse group insurance from your bank and subscribe to an outside insurer. The Lagarde and Hamon laws and the Bourquin amendment are the legal provisions which allow you to make this change in borrower insurance.
Are some mortgage loan insurance guarantees mandatory?
Yes! Death and PTIA (Temporary and Irreversible Loss of Autonomy) guarantees are systematically provided.