By signing their credit, each borrower must most often take out insurance to cover the risks of “death, disability, incapacity” or even “loss of employment”. Since September 1, 2010, mortgage subscribers can choose a different insurance from that offered by the bank if the guarantees are equivalent. It is important to be able to compare these insurances and know exactly what they cover.
Insurance “Death, Invalidity, Incapacity”
This insurance guarantees the bank that it will be paid if the borrower’s state of health no longer allows him to work or if he dies. The “death, invalidity, incapacity” insurance also avoids the obligation for the heirs to pay the credit in the event of the borrower’s death. In addition, it most often covers incapacity for work. Warning: The majority of contracts exclude certain risks such as the practice of violent or dangerous sports or travel to certain risky countries.
For a mortgage, “death-incapacity” insurance is compulsory in most cases. However, it is optional for consumer credit. If the borrower dies, the insurer reimburses the balance of the loan, either in full if the deceased was 100% insured, or in part if he was only partially insured. In the event of total invalidity, the insurer reimburses the lender the balance of the loan according to the same rules as for death. In addition, if as a result of an illness or an accident, the borrower is forced to cease his activity, the incapacity for work insurance makes it possible to take over the monthly payments, after a period of deficiency generally fixed at 3 months.
“Loss of employment” insurance
There are two types of “job loss” insurance: the first allows the lender to defer the amounts due at the end of the loan. In this case, the interests of the deferral are borne by the insurer. The second guarantees that the insurer will take care of the payment of monthly payments, in part or in full, during a limited period established as of the subscription of the insurance. In this option, the guarantee can only play a certain number of times. Usually, these will be 2 non-consecutive periods, with a maximum duration of 18 months each. As with the “incapacity for work” insurance, this insurance provides for a deductible period most often fixed at three months. It should be noted that certain contracts only grant this guarantee to borrowers exercising a professional activity on a regular basis.
The cheapest loan insurance is not necessarily the best
Especially in the event of disability for work or loss of job. Expressed either according to the total initial capital borrowed or according to the capital remaining due, the cost of insurance is quite difficult to compare from one insurance to another. The easiest way is to carefully read the prior offer of credit, which must show the cost of insurance very explicitly. When insurance is offered by the bank, the premium is included in the monthly payments, but it must also be presented separately in the amortization table. The Rite Lenders advisers will not only allow you to choose a loan at the most advantageous conditions but also to be able to take out the best insurance offers to cover your borrower risks.