How Does Home Loan Insurance Work?





Are you thinking of taking out a loan to buy the house, flat or estate of your dreams? You will probably need home loan insurance. And even though it is not legally required, in practice, no lender will agree to finance your mortgage without loan insurance. What exactly is it? All explanations below!

Why Take Out Home Loan Insurance?

Borrower insurance is a financial coverage required by the bank granting you a mortgage. In fact, the bank runs the risk of not being reimbursed if you are insolvent due to, for example, incapacity for work, disability or death. Thanks to your subscription to a mortgage loan insurance, the insurance company will be able to partially or fully compensate the lender.

It is, therefore, a contingency contract that protects both the borrower and his legal heirs, as well as the lender, in the event of non-payment in the repayment of the loan maturities. In order to find the most suitable insurance at a reduced cost, it is advisable to use the services of professionals such as Vousfinancer.com. And that’s because this insurance contract is really crucial in the validation of your mortgage by the bank.

What are the guarantees of mortgage insurance?

There are three categories of mandatory collateral for home loan insurance. Death guarantees insure the borrower if he dies and it is up to the insurer to repay the amount of the remaining credit.

Disability guarantees protect you in the event of an accident or illness that prevents you from practicing your profession and, therefore, receiving income. Here the insurer reimburses the remaining credit, usually within a 3-month waiting period. There are several types of disability guarantees, in particular:

  • guarantees of total loss and irreversibility of autonomy;
  • guarantees of permanent and total disability;
  • guarantees of permanent and partial disability;
  • guarantees of professional disability (more information in Immoz).

Loss of employment guarantees derived from home loan insurance only protect employees with an indefinite contract for at least 1 year. In the event of unemployment of the borrower, under certain conditions, the insurance covers part of the settlement of their monthly loan installments in a grace period of 3 to 6 months and a grace period of 60 to 120 days from the Pôle-emploi compensation.

How To Take Out Borrower Insurance?

With the introduction of the Lagarde Act, when you want to take out credit insurance, you can choose between two options:

  • group insurance, offered by the bank where you applied for the mortgage;
  • the individual home loan insurance contract or the delegation of insurance, issued by an entity external to the bank (broker or insurer).

Although credit insurance is not required by law, the bank must provide you with a Standard Information Sheet (ISP) during the first loan simulation. This includes the list of insurance guarantees required by the lender.

If you decide to opt for group borrower insurance, the bank will send you an informative notice with the guarantees and conditions required for the application of the insurance contract.

If, on the other hand, you opt for the delegation of insurance, you can compare the level of guarantee between the mortgage insurance contract to which you adhere and that of the entity from the Standard Information Sheet.

To make it easier for you to choose the best insurance, you can use an online mortgage insurance comparator.

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