Real Estate Credit: For All Borrower Insurance

Borrower Insurance: Subscribers usually need to fill out photo credits for health surveys: Getty Images

Borrower Insurance: Subscribers usually need to fill out photo credits for health surveys: Getty Images

For almost all mortgages, the lender asks the buyer to take out borrower insurance. This applies to repayment of loan installments in the event of a borrower’s default and if the borrower’s repayment cannot be respected. Death, complete and irreversible loss of autonomy, disability, unemployment … the risks covered are diverse. Borrowers benefit from increased transparency of information about guarantees and fees claimed by insurance companies.

Overview:

  • Real Estate Credit: Can Lenders Request Borrower Insurance?

  • Borrower Insurance: Why Medical Questionnaire?

  • Death, disability, unemployment … What risks does the borrower’s insurance cover?

  • Borrower Insurance: Increasingly Transparent Guarantee and Price

Real Estate Credit: Can Lenders Request Borrower Insurance?

Borrowers are free to take out insurance, but for mortgages, insurance is mostly systematic. Given the amount of money at stake, it seems important to protect yourself from unforeseen circumstances. This is a guarantee not only for lenders, but also for borrowers and their relatives. The lending financial institution may require the borrower to take out insurance and will not be required to lend if the applicant does not submit it. Indeed, there is no legal obligation to guarantee the acquisition of a loan.

In general, financial institutions involve offering borrower insurance when proposing a mortgage. However, it is possible to refuse it and choose another insurance company. For this reason, insurance policies must offer at least the terms provided by the lender. If the counter-proposal does not meet this stringent requirement, the lender does not have to accept the change.

To know

For consumer credit, you rarely need to have borrower insurance.

Borrower Insurance: Why Medical Questionnaire?

For loans over € 200,000, the insurance company will ask the borrower to complete a medical questionnaire to assess their health. It allows him to calculate the risk of illness and death. We recommend that you respond in good faith so as not to omit or obscure important information. Omissions or misrepresentations can lead to invalidation of insurance policies.

A health questionnaire usually consists of 14 questions and should be answered with a “yes” or a “no”. If you answer “yes” to all the questions, the company will send you a direct and definitive proposal. If you answer “no” to one or more questions, the insurance company will ask for additional information or have a medical examination (such as a blood test). Other personal information such as history, current illness and treatment, weight, height, and borrower’s blood pressure may also be requested.

If you have a large amount of borrowing or if you think you are elderly, you may need a medical examination. To get a quick response from your insurance company, consider attaching a document supporting the file (prescription, hospitalization report, professional examination, X-Ray, scanner, etc.) to your health questionnaire.

What is the right to be forgotten?

With the right to be forgotten, borrowers with cancer or hepatitis C will not relapse more than 5 years after the end of treatment, not to mention the disease. In addition, some financial institutions are now choosing not to require health surveys from “loyal” customers.

Death, disability, unemployment … What risks does the borrower’s insurance cover?

As part of the borrower’s insurance, the insurer must attach a notice summarizing the guaranteed risks to the contract. Warranty is generally related to the following situations:

  • death. This is a basic mandatory guarantee. In case of death, the balance will be paid by the insurance company to the lending financial institution.

  • Complete and irreversible loss of autonomy (PTIA). This is also a mandatory basic warranty. Under certain age conditions, unpaid capital is paid by the insurance company to the lending financial institution.

  • Temporary All Occupational Disorders (ITTT). Installment refunds by the insurance company are made after the waiting period and are usually time-limited. This clause and the assumptions of this warranty are not binding.

  • unemployment. Installment refunds by insurance companies are limited in duration and are often two years. Generally, only holders of a permanent contract (CDI) with a significant seniority system in that position are eligible. This warranty is optional.

Borrower Insurance: Increasingly Transparent Guarantee and Price

Under pressure from the Ministry of Economy and Finance, bankers and insurers have decided to improve the information provided to borrower insurers. Especially with regard to the invalidity of the guarantee, the main reason for the borrower’s complaint, the issue is to make the guarantee and its amount clearer and more transparent. The insurance company promised to do so without checking the schedule. It is then clearly shown whether the disability guarantee refers to the concept of disability recognized by social security. In addition, the insurance company must display the cumulative amount of premiums after enrollment for 8 years (average mortgage retention period). These explanations are of interest to the subscriber choosing a monthly payment calculated based on the borrowed capital (in this case the premium is fixed) or the unpaid capital (in this case the premium is reduced). The purpose is to be able to determine if there is. .. This second option is useful if you only want to take out a loan.

Always ready for dismissal?

In parallel with the requirement for transparency, the Parliamentary Economic Committee has adopted a bill in support of annual retirement. The purpose is to allow the borrower to cancel the insurance related to the mortgage at any time. Indeed, currently cancellations are only possible once a year on the anniversary of the contract. In addition, the legislator’s purpose is to promote competition between offers. Currently, 85% of policyholders require banks to take out borrower insurance. For law proponents, the bill may allow borrowers to make between 5,000 and 15,000 euros in their mortgage savings. On the other hand, for banks and insurance companies, this text risks undermining the principles of risk pooling. According to them, this can lead to discrimination against the most vulnerable profiles.

..