What is mortgage insurance used for?
Also called borrower insurance, mortgage insurance insures the person who applies for a loan. It also protects the lender and guarantees payment of the monthly loan installments in the event of disability or long-term hospitalization or in the event of death. It covers unforeseen events that may affect the refund.
The mortgage represents a significant amount, which is why the bank requires insurance when taking out a loan. If the borrower defaults on repayment, the insurance will compensate the lender. As a subscriber, the borrower helps to insure his family should something happen to him. Therefore he does not lose the property he acquires.
Borrower insurance, what are the obligations?
Mortgage insurance entails certain obligations for the lender and the insurer. The latter is obliged to provide the information required at the time of the subscription. He undertakes to pay the insurance contributions. It is his duty to inform the insurance company if he wishes to request additional guarantees. In addition, the lender is required to offer an FSI or standardized information sheet. This document is essential during the loan simulation and it indicates the information necessary to carry out the comparison of the price of the insurance and the guarantees. If the borrower goes through an insurance delegation, the lender should not charge him delegation fees. Finally, he cannot refuse the insurance contract you choose as long as the guarantees remain the same as the ones he offers.
What are the guarantees of mortgage insurance?
Guarantees are intended to protect both borrower and lender. Some are mandatory, while others are considered complementary.
When it comes to taking out home loan insurance, the death benefit remains the most important. Should the borrower disappear, the insurance company is responsible for paying the monthly loan payments. There’s also the PTIA warranty, which covers you in the event of a total loss of autonomy. It covers your expenses if you suffer from an illness that applies to a significant degree of disability. The subscriber must be under the age of 65 to obtain PTIA status.
Additional guarantees are optional, but IPT and ITT guarantees are often required for a home purchase. When you sign your contract, you can choose IPT or permanent and total disability cover. You must be at least 65 years old when you declare your disability. This status means that you are unable to carry out your professional activities. The IPP guarantee or permanent and partial disability is also optional. It indicates a degree of disability of approx. 50%. In case of total temporary incapacity, the subscriber can opt for an ITT guarantee. This covers him when he is unable to work for a fixed period. Job loss coverage is also important. If you lose your job, the insurance company is responsible for repaying your mortgage.
It should be noted that there are criteria for the exclusion of guarantees, in particular:
- The nature of your accident;
- Practicing an extreme sport;
- Undeclared pathology;
- The nature of your professional activity.
They will probably invalidate your claim for compensation from the insurance.
How does mortgage insurance work in the event of damage?
If the borrower finds himself in one of the situations that the loan insurance covers, he must follow certain steps to initiate the compensation. First of all, he must report the loss to his insurance company. The deadline for doing this is often specified in the general conditions of the contract. He is also required to provide documentation. A sample of his mortgage contract is required for compensation. As for the rest of the supporting documents, this varies according to the claim, here are some examples:
- A death certificate;
- A certificate from Social Security;
- Proof of your early retirement payments;
What are the different types of home loan insurance?
The bank offers an insurance agreement called group insurance. This type of contract allows the insurance company to take out its loan while the insurance is taken out in the same place. People who have taken out a mortgage with this bank benefit from a single contract that contains the same guarantees. The rate applied is the same.
Borrowers can also choose individual insurance or insurance delegation. Offered by an insurance company or a broker, this contract is especially valued for its cost. It is often cheaper compared to group insurance. If you want to take out this type of insurance, make sure that the guarantee level is not lower than the group contract (on average in 2022 the rate is 38% lower per borrower, i.e. an average saving of 7,650 euros on credit ). If necessary, the bank will not validate it.
There are specialized platforms (like Expel me) that can help you find the best contract for free and will take care of all the formalities for you.