When you sign a mortgage loan, the bank almost always requires borrower insurance. This contract covers your monthly payments if a serious accident, illness, or death prevents you from repaying. It protects both your family and the lending institution. Understanding how it works allows you to choose the right coverage and avoid paying too much throughout the loan duration.
Share and distribution between co-borrowers: the adjustment that the bank does not explain
If you borrow alone, the question does not arise: you are covered at 100%. However, when borrowing together, a crucial choice arises. The share refers to the portion of the loan covered by insurance for each borrower.
Let’s take an example. A couple borrows together. If each is insured at 50%, the death of one results in coverage of half of the remaining capital. The other must continue to repay their share. With a share of 100% for each person, the capital is fully repaid, regardless of who passes away.
The share directly affects the cost of insurance and the level of protection. Moving from 50/50 to 100/100 nearly doubles the premium but eliminates the financial risk for the surviving spouse. A common compromise is to distribute according to income: the one who earns more carries a higher share.
You can learn more about mortgage loan insurance to compare possible configurations and assess their impact on your monthly budget.
Insurance guarantees: death, disability, incapacity, and unemployment
Not all borrower insurance contracts cover the same risks. Here are the guarantees you will encounter most often:
- Death and PTIA guarantee (total and irreversible loss of autonomy): the minimum requirement demanded by any bank. The insurer repays the remaining capital if the borrower dies or permanently loses all autonomy.
- Permanent disability guarantee: it applies when a disability permanently reduces your ability to work. Depending on the recognized disability rate, the coverage is total or partial.
- Temporary incapacity to work guarantee (ITT): it covers your monthly payments during a sick leave or accident, after a defined waiting period in the contract. Note that individuals without professional activity (retirees, stay-at-home parents) generally do not have access to this.
- Unemployment guarantee: optional and often costly, it covers part of the payments in case of dismissal. The activation conditions are strict, and the limits are capped.
Before signing, read the exclusions of coverage. A risky sport, a dangerous profession, or a pre-existing condition can reduce your coverage or even eliminate it for certain claims.
Lemoine Law and right to be forgotten: what has changed for borrowers
Since September 1, 2022, the Lemoine law allows the cancellation of borrower insurance at any time, without fees or notice. Before this date, you had to wait for an annual deadline to change contracts. This right also applies to existing loans.
In practice, you can leave your bank’s group contract in favor of an external insurer, provided that the guarantees offered are at least equivalent. The bank has ten working days to accept or refuse, and any refusal must be justified in writing.
Another notable advancement: the health questionnaire is eliminated under two conditions. The insured amount per person must not exceed 200,000 euros, and the loan repayment must end before the insured’s 60th birthday. This measure facilitates access to credit for many first-time buyers who feared a medical rejection.
The right to be forgotten has also been strengthened. Former cancer or viral hepatitis C patients no longer have to declare their condition five years after the end of the treatment protocol, without relapse. This period was previously longer, leading to surcharges or exclusions that were difficult to accept.
Group contract or insurance delegation: how to choose
Why does the distinction matter so much? The bank systematically offers its own contract, called a group contract. It pools the risk among all borrowers. The rate is the same for a given profile, regardless of your actual health status.
Insurance delegation involves choosing an external insurer. This individual contract adjusts the premium to your profile: age, profession, lifestyle habits, medical history. For a young and healthy borrower, the cost difference can be significant over the total loan duration.
Here are a few points to check before changing:
- The equivalence of guarantees: the bank requires that the new contract covers at least the same risks as the old one.
- The method of calculating contributions: on the initial capital (fixed contribution) or on the remaining capital (degressive contribution). The latter method costs less over time.
- The waiting periods and deductibles: a cheaper contract may impose a longer waiting period before any compensation.
Comparing at least three quotes before signing remains the most reliable method to identify the contract suited to your situation. The effective annual insurance rate (TAEA), which must be mentioned, allows for a direct comparison between offers.
Mortgage loan insurance represents a significant portion of the total cost of a loan. Since the Lemoine law, each borrower has a concrete lever to adjust their coverage and reduce their bill. Taking the time to read the guarantees, check the chosen share, and compare group contracts with delegation offers is part of the actions that sustainably protect your real estate project.
