Reduce the cost of a home loan by playing on loan insurance
May 24, 2019
When signing a mortgage, the bank requires the purchase of a borrower insurance to cover the risks of death and disability. She then proposes in a systematic way her group insurance contract which is distributed by a subsidiary or a partner. But you should know that the law allows for the use of personal protection, usually less expensive. It is therefore up to each borrower to make a comparison between the offer presented by the bank and the various individual insurance offers on the market.
Standardized coverage of group insurance
The bank granting the mortgage systematically annexes its group insurance contract to its loan offer. This loan insurance is a collective cover: the contract is based on the principle of pooling risks. Thus, the guarantees and the tariff are the same for everyone. As a result, it is not adapted to everyone according to their profile (age, state of health). Also, the amount of the insurance contribution is fixed until the end of the mortgage, because its calculation is made on the basis of the capital borrowed.
Individual insurance: a cover that fits
Individual insurance is developed according to the characteristics of the borrower. They take into account the profession of the borrower, his state of health, sports and leisure he practices.
The pricing process is as different as for group insurance, as the contribution is calculated in proportion to the outstanding capital. Over the repayment, the amount of the insurance premium decreases.
Thanks to the customization of guarantees and this degressive pricing, the insured can realize significant savings.
Why choose individual insurance?
Thanks to the reforms of recent years, borrowers can choose individual insurance, instead of the group insurance contract offered by the lending bank, to access a lower rate and reduce the overall cost of credit immovable.
And since January 2018, allows borrowers to cancel their loan insurance each year, at the time of the anniversary date of signing the contract.
In order for the bank to accept the implementation of a delegation of insurance, it is necessary to make sure to select a contract with guarantees at least equivalent to those of the offer of the lending organization. Also, there must be a notice period of 15 days for a credit subscribed less than 12 months ago. For credits of more than one year, the notice is 2 months.