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Real estate loan insurance: our advice to change the contract



 Since 2010, several texts relax the rules to choose a mortgage insurance other than that proposed by your bank. This operation is called insurance delegation. You want to change loan insurance? The Credit Guide explains the 5 things you need to know before you start.

1. The Cogilaw Company, the Mahon Law, and soon the Firss II Law

1. The Cogilaw Company, the Mahon Law, and soon the Firss II Law

Small summary. In 2010, the Cogilaw Company was introduced in favor of the purchasing power of consumers. Among its flagship measures is the insurance delegation. That is to say the possibility of choosing an individualized insurance, adapted to its needs and profile, to the detriment of group insurance offered by banks.

Four years later, the Mahon Law goes even further. It allows borrowers to terminate their insurance contract after signing the mortgage, within one year. This extra time allows them to compare and negotiate their insurance more serenely.

A ” lapse of time ” that should be soon extended. Soon under discussion in the Senate, the Firss II law should indeed implement the insurance change to the anniversary date of the contract.

2. Individual insurance vs. group insurance, what differences?

2. Individual insurance vs. group insurance, what differences?

When banks offer their insurance when negotiating the mortgage, pricing conditions are applied depending on the category of borrower in which you are located. This is called group insurance. Of course, “less risky” profiles (for example, borrowers who do not smoke) are not advantaged because they do not have adequate rates.

It then becomes interesting for them to turn to the individual insurance offered by “external” insurers, calculated according to their situation (age, profession, amount borrowed). The gain is not negligible. It can save them up to 50% on the cost of insurance.

3. Compare insurance offers

3. Compare insurance offers

If you choose loan insurance delegation, we advise you to compare the mortgage insurance offers. For this, do not hesitate to go through a real estate insurance broker. He is the intermediary between the insurers and the insured. It puts in competition the main actors of the market and negotiates for the insured the best tariffs.

4. What are the criteria to carry out a delegation of insurance?

4. What are the criteria to carry out a delegation of insurance?

Main condition: the equivalence of guarantee. If you make a delegation of insurance, the “outside” insurer must offer you exactly the same guarantees as those initially requested by your bank. Additional guarantees may be added to the contract.

If the guarantees are not “equivalent”, the bank may refuse the delegation. Another condition: the delay. You have up to 1 year after signing the mortgage to terminate your insurance. The transaction must be completed no later than 15 days before the anniversary date.

5. Important point: the loan insurance rate

5. Important point: the loan insurance rate

This is the share of mortgage loan supported by the insurer. It varies between 1% and 100% per insured. Let’s take a very simple example. You have signed a 50% insurance rate. Following an accident, you still have to pay 70 000 € on your mortgage of 200 000 €.

With a quota of 50%, you are supported up to 35 000 €. Several distributions are possible:

  • If you are single, you must generally subscribe to a full quota of 100%, therefore;

  • If you buy in a couple, the total quota must reach at least 100%. This can be 50% / 50%, 70% / 30% or 80% / 80%. Suppose a couple has chosen a 60% / 40% quota. If the spouse who has the 60% share dies, the insurer covers 60% of the outstanding capital. The 2nd must then repay the remaining 40%. Note that, the higher the proportion, the better the care and more expensive will be the insurance.

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