Home loan insurance: what to remember
When signing a mortgage loan agreement, the lender may require the person borrowing credit insurance. The subscription to this mortgage insurance is almost systematic nowadays and provides certain rights to the borrower. Rights that the credit institution does not however necessarily communicate to the latter.
The choice of insurance contract coverage
You should know that a mortgage insurance contract must at least cover the death and loss of autonomy of the borrower. The guarantees can then extend to illness, disability or loss of employment. It is necessary to read all the clauses of the insurance contract before signing it in order to be aware of any exclusions and to have the guarantee of having good coverage.
In addition, it is preferable to insure up to 100% of the amount borrowed if there is only one borrower. In the case of a co-loan, you will have to choose which borrower is covered and at what percentage. In particular, insurance takes into account parameters such as the income of each contracting party to determine the ratio.
The payment of the borrower's due dates is thus covered by the insurance according to the coverage stipulated in the contract in the event of claims.
The choice of the insurer
The credit company that grants the loan can offer to insure the mortgage itself through a subsidiary dedicated to insurance. This is called a group contract or house contract. However, since the entry into force of the Laguarde law in 2010, the borrower is free to take out his mortgage insurance with an insurer of his choice through an individual contract.
The insurer chosen by the borrower must in particular have guarantees equivalent to those required by the bank. This law on insurance delegation was passed in order to offer borrowers competitive insurance rates through competition between insurer companies.
The rights of the contracting party for mortgage insurance
The lender is strictly prohibited from charging additional processing fees to the borrower if the latter opts for delegation of insurance. However, banking institutions persist in overtaxing the costs of borrowers using individual contracts or increasing the rate of their mortgage loans in order to force them to subscribe to a group contract.
These practices have therefore led the majority of borrowers to stick to the insurance offered by their banks. However, studies carried out by comparators denounce that the delegation of insurance allows borrowers to make considerable savings. These savings can run into the thousands of us dollars.
The borrower also has the right to annual termination of his mortgage insurance contract. The Hamon law on annual termination was introduced with the aim of allowing borrowers to change their insurance contract to another one that suits them better. The termination of a contract and the subscription with another insurer must nevertheless be approved beforehand by the lender.