Non-bank loan insurance: all you need to know
As of January 1, 2018, the subscribers of borrower insurance will be able legally to terminate their contract at the time of the anniversary date of signature of their mortgage offer in order to replace it with non-bank loan insurance. And this regardless of the age and duration of the credit.
This system is already accessible to the holders of borrower insurance who has subscribed a mortgage since March 1, 2017. The persons wishing to do so can decide to cancel their loan insurance contract during the 12 months following the loan. signing credit and choosing a less expensive solution. It is a device coming within the framework of a reinforcement of the law Hamon of March 17, 2014, relating to the consumption.
Find out what loan insurance is for, how to choose it, and how to cancel for non-bank insurance.
What is the purpose of mortgage insurance?
Loan insurance is a mechanism that allows the repayment of part or all of the credit when the borrower is unable to meet his monthly payments as a result of a loan. accident, illness or death.
The insured must pay each month an amount of insurance contribution in addition to the monthly repayment of the credit. In the event of a risk covered by the insurance contract, it is the insurer who takes the place of the insured to pay the monthly loan.
What types of loans are involved?
If it is considered essential by the banking organizations to guarantee a mortgage, the insurance borrower can also cover all types of credits: personal loan, professional loan, consumer credit …
How to choose your bank credit insurance?
Before embarking on the subscription of a bank loan insurance, you should carefully study the insurance contract proposal, taking into account that you can choose an insurance policy. off-bank loan.
The amount of the insurance contribution is to be considered, as are the exclusion clauses and the level of cover. Coverage may vary depending on the health status of the borrower, and factors deemed “at risk” such as smoking.
Regarding the level of coverage, the insurer may, depending on the borrower’s wishes, make the decision to guarantee a variable percentage of the monthly payment in the event of a work stoppage, or to guarantee the remaining capital in case of death. .
Guarantees may vary from one insurance contract to another. And it is important to pay close attention to possible waiting periods or deductibles, during which the insured does not benefit from coverage. There are different types of insurance contracts, which may vary depending on the credit for which the insurance is taken out: banking group insurance and non-bank loan insurance (individual insurance).
It is important to note that, if a credit institution can try to impose the borrowing insurance on the client, the latter is not obliged to accept his insurance offer. The borrower has the freedom to choose the organization that will guarantee the repayment of the credit. You can decide to take out-of-bank loan insurance.
Bank Group Insurance
Group insurance is a collective contract previously subscribed by the lending bank on behalf of its borrowing clients. Each client borrower of the bank can thus benefit from a cover dedicated to his credit. This type of contract pools risks between all insureds. To subscribe, it is necessary to meet certain criteria allowing the bank to verify that the borrower enters the “average”, ie it does not present high risks. Thus, if you do not fall within the selection criteria of the insurance, your application for membership can be rejected.
Non-bank loan insurance
The borrower may also decide to take out individual loan insurance. This is called “insurance delegation”. The steps can be carried out directly with the external insurer chosen by the borrower or through a broker specializing in loan insurance. The contract is established according to the profile and the situation of the borrower: it is a personalized contract at the rate thus determined to the fair, according to the level of risk represented by the borrower.
We recommend that you take the time to compete with the loan insurance offer issued by the lending bank and the different offers offered by the insurance companies in order to access the best contract on the market: the cheapest possible and covers you correctly, respecting the requirement of guarantees of the bank. Buying out-of-bank loan insurance can save you a lot of money on the overall cost of your home loan, compared to the bank group contract. It all depends on your profile.
The procedures will be simplified from 1 January 2018, and this, for any holder of a bank borrower insurance. In addition to the specific conditions applicable to persons who have taken out insurance on 1 March 2017, the law makes it possible to terminate a loan insurance contract free of charge each year, at the time of the anniversary date of subscription.
The cancellation can then be accepted by the lending institution only if the new contract to be put in place includes guarantees equivalent to the current one. So that the steps are effective, it is necessary to send a registered letter to the insurer to notify him of your wish to terminate your contract, at least 2 months before the due date, and of course to solicit a new insurer.
The steps to take to cancel a loan insurance
In accordance with the legal framework, the termination of a borrower insurance contract can be done at the time of each anniversary date of the latter’s signature. The borrower must apply for membership in a new credit insurance policy. Once the membership certificate has been issued, it should be sent with the request for termination addressed to the banking organization so that it can verify and validate the good equivalence of the guarantees and set up the substitution of insurance.
The bank has 10 working days to provide its response to the customer. It can refuse the change of borrower insurance based on the grid of the CCSF (financial sector advisory committee), a table allowing a comparison of the guarantees offered by mortgage insurance.
If the bank does not respect the response time of 10 working days, or in case of unjustified refusal, it is liable to pay a fine of 3,000 euros. Finally, it should be noted that no charge for a termination request may be required by the termination request.