How do you choose the right creditor insurance ?
19 December 2023
Credit insurance protects the borrower and his or her family. If the borrower is no longer able to pay the monthly instalments, the guarantees will be put in place to cover them. The bank will then be able to recover the capital lent. Loan insurance represents a substantial percentage of the overall cost of the loan. So it's important to choose the right insurance, and take advantage of the competition.
You need to analyse the cover offered, including standard cover and optional cover.
Compulsory cover includes :
- Death cover: in the event of the borrower's death, the insurance will repay the capital outstanding to the borrower. Total Irreversible Loss of Autonomy (PTIA) or Definitive Absolute Disability cover: when the insured is affected by a disability that requires the permanent assistance of a third party, the capital outstanding will be repaid.
Optional cover includes :
- Permanent Total Disability (PTD): if the insured is disabled and permanently unable to work, the insurance covers the entire outstanding capital or loan instalments;
- Cover for Permanent Partial Disability (PPD): when the disability is between 33% and 66%, part of the monthly loan instalments are covered;
- Temporary incapacity to work (ITT): if the insured person is unable to work, the loan repayment will be covered by the insurance beyond the deductible period chosen at the time of taking out the policy (from 15 to 180 days) until the end of the period of sick leave or accident;
- Cover for the risk of loss of employment (PE): this covers the insured in the event of unjustified redundancy for which he or she receives unemployment benefit. The insurance pays a lump sum or covers all or part of the loan repayments for a maximum period defined in the insurance contract;
- Comply with the principle of equivalent cover: insurance delegation must comply with the requirements set out by the credit institution in its standardised information sheet. This document allows the consumer to look for loan insurance that differs from that offered by the bank. It must contain the following information:
- - An overview of the future borrower's situation (needs, plans, expectations, etc.);
- - A reminder of the essential elements of the proposed mortgage loan;
- - The risks that must be covered;
- - Exclusions, limits of cover, excesses and waiting periods;
- - Definitions of cover and the main concepts related to the contract;
- - How to take out the insurance;
- - The cost in euros of the monthly premium;
- - The total cost of insurance for the entire term of the mortgage;
- - the effective annual rate of insurance (also known as the "TAEA").
Finally, when choosing your loan insurance, you should look at the following criteria:
- - the maximum age at which cover may be taken out ;
- - contractual exclusions ;
- - The deductible period between the occurrence of the event and the start of compensationThe duration of compensation for temporary situations (redundancy or sick leave)The waiting period, if any, during which the insurance does not cover the loan instalments.