Borrower insurance to repay despite the vagaries of life

Publish-editorial — A real estate project or a major purchase in sight?? You will soon be borrowing money from the bank. You will therefore consider the question of borrower insurance. Definition, obligation, points of attention and guarantees, zoom on all the important points of borrower insurance.

What is borrower insurance?

Borrower insurance is insurance that guarantees you full or partial reimbursement of your loan. This coverage is defined by the guarantees of your insurance. In the majority of cases, the events that give rise to the activation of the insurance are:

  • the death
  • loss of autonomy
  • permanent disability
  • job loss
  • temporary incapacity for work (ITT).

If the part of the insured loan does not exceed 200,000 euros and if the last installment is repaid before your sixtieth birthday, be aware that your insurer can no longer request a medical examination.

Is it mandatory to take out borrower insurance?

Technically, borrower insurance is not compulsory insurance. However, the lender may require it and make it a condition of granting.

In general, it is quite rare that you are forced to take out borrower insurance when taking out consumer credit. However, for a mortgage, it is an almost systematic requirement of banks.

What are the points of attention of a borrower insurance?

Before subscribing to a borrower’s insurance, you must pay attention to certain points. Indeed, these can change radically from one insurer to another. These points of attention are:

  • waiting period and waiting period
  • warranty exclusions (such as the practice of a “risky” sport)
  • age limits
  • the method of coverage (lump sum or indemnity).

What are the possible guarantees of borrower insurance?

Depending on your insurer and your personal choice, your borrower insurance contract may contain guarantees in the event of death, loss of autonomy, permanent disability, loss of employment and temporary incapacity for work. However, not all clauses are automatically present. Let’s see in detail what each of these clauses covers.

The “death” cover of the borrower’s insurance

The “death” cover is always present in a borrower’s insurance contract. However, it is also still subject to an age limit. Thus, it is possible that the period of your “death” coverage is shorter than the total duration of your reimbursement.

Today, the law imposes coverage for death by suicide, subject to specific clauses. These include the destination of the property concerned by the loan and financial issues.

Borrower insurance “loss of autonomy” coverage

To activate the “loss of autonomy” coverage of your insurance contract, you must meet four conditions:

  • you find yourself unable to engage in gainful employment
  • your incapacity must be permanent
  • you must have the absolute obligation to have recourse to the constant assistance of a third person for three of the four acts of everyday life considered ordinary, namely, eating, dressing, moving around and washing yourself
  • you must be below the age limit set in your contract (generally 60 or 65).

In practice, be aware that your insurer will certainly ask you to benefit from a 3rd category disability pension to activate your cover.

The “permanent disability” cover of the borrower’s insurance

In concrete terms, there are two permanent disability covers: total permanent disability and total permanent disability. According to the conditions of your contract, total permanent disability corresponds to:

  • inability to engage in any activities to obtain earnings or profits
  • the inability to perform the activity you were performing at the time of the claim.

In general, to obtain total permanent invalidity, your degree of incapacity must be greater than 66%. Partial permanent invalidity occurs when an illness or an accident leaves permanent sequelae. According to the terms of your contract, partial permanent disability occurs when:

  • you are partially incapacitated to carry out any activity allowing you to obtain gains or profits
  • you are partially unfit to carry out the activity which you carried out with your accident or illness.

In general, to obtain permanent partial disability, your degree of disability must be between 33% and 66%.

The “loss of employment” cover of the borrower’s insurance

The terms of compensation for “loss of employment” cover vary greatly depending on the contract. The waiting period, the deductible period and the duration of compensation are the crucial points of your insurance.

Note that in general, the “loss of employment” coverage only comes into play if you have been made redundant and that the cessation of your salaried activity entitles you to the payment of an unemployment benefit.

The “temporary incapacity for work” cover of the borrower’s insurance

Cover for temporary incapacity for work only comes into play in the event of an accident or illness. You must then be recognized as temporarily unfit to carry out either your “normal” activity or any form of remunerated activity according to the conditions of your contract. Your interruption must be total.

Borrowing money for the long term can be risky. You never know what life has in store for you. To ensure that you can repay your loan in full, borrower insurance covers you against the vagaries of life. Think about it.

Content provided by Luko

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