Insurance is essential for potential buyers of real estate. Without this guarantee, no bank is ready to guarantee a mortgage. In fact, knowing what the borrower’s insurance covers should be well known. In all cases, this product partially or completely covers mortgages. Keep in mind the differences between the costs and guarantees included in the contract and will vary from organization to organization. This is why some buyers use insurance brokers to find the best product for their situation and profile. Depending on your age, health condition, and property price, some insurance policies are better than others.
What is borrower insurance used for?
The answer is simple. Used to insure real estate buyers. Unless you rely on a mortgage and lend 100% to real estate, it is impossible not to have it. Mortgage repayments are extended over the years. Monthly payments are often made over 20 to 30 years, depending on the file. This period is long. And no one is immune to the whims of life.
Banks, lenders, require applicants to take out a mortgage in order to take out borrower insurance. This is essential for two reasons. The first protects the acquiring bank and the second protects the bank. Some events can disrupt loan repayment plans.
Indeed, physical or psychological illnesses can lead to work cessation for weeks or years. For the first few months, the disability insurance included in the employment contract allows employees to maintain their salary. However, it may stop after a while. Due to an accident, illness, layoff, or other temporary or permanent disability, you may not be able to pay your monthly loan.
Borrower insurance Therefore, for all of the above reasons, it is designed to take over in the event of payment default.
How Does Borrower Insurance Work?
Borrower insurance is an individual. If you have co-borrowers, you will need one for each. The assumption consists of the borrower’s investment. If the shares are equal, the insurance will cover 50% of the monthly cost in the event of a failure and 50% of the loan in the event of the death of one of the two borrowers.
Evaluate the health of each person in order to take out borrower insurance. Therefore, it is natural that the cost varies from person to person. The higher the risk of default by the borrower, the higher the cost of insurance. Therefore, if the insurer considers the professional situation vulnerable, the cost will be high. Contract type, field of employment, years of experience, and age are one of the criteria considered to assess the level of risk.
Exercise is the same for good health. Each subscriber is required to submit a health questionnaire and, in some cases, additional tests. Age, medical history, and risk factors (genetic disease, smoking, lifestyle, etc.) are assessed by the insurance company. Certain illnesses may justify a refusal by the insurance company.
Prices can be very high and should be part of your total budget. The buyer can even decide to increase the amount of his mortgage to cover them. It is important to consider all costs before taking out a mortgage to avoid inconvenience.
What Does Borrower Insurance Cover?
Borrower insurance consists of a number of clauses that specify inclusion and exclusion. In all cases, it includes death insurance in certain cases, especially except for suicide, reckless risk-taking (high-risk sports), and death from illness that exists at the time of signing the contract.
In addition, this type of product also covers serious illnesses and permanent disability after an accident. Temporary failures are also covered. Loss of employment is alsoBorrower insurance. In these cases, the insurance will take over the time required for the borrower to be able to repay his credit.
Many provisions are provided. In particular, exclusions are included. To ensure that you do not pay premiums for free, borrowers have every interest in maintaining transparency during health surveys. In fact, if the disability or death is due to an existing cause, the insurance company may refuse to pay the contribution. Insurance premiums are very high.. Therefore, to avoid unpleasant surprises, the contract must be reviewed before it is signed.
(By the editorial staff of hREF agency)