It is a major reform that is looming for the millions of French people who have, or are going to have, a mortgage. From June 1, after the final green light from Parliament, it will thoroughly review the operation of loan insurance. With the key, thousands of euros in savings in perspective for borrowers and the end, subject to conditions, of the health questionnaire.
Thunderbolt. Last week, against all expectations and after a long legislative series, the Assembly and the Senate agreed to thoroughly revise the operation of mortgage loan insurance. This Thursday, the deputies must give their final green light to the compromise found in the joint committee. Senators will do the same on February 17. This text will lead to upheavals, the repercussions of which are still poorly measured, for the 7 million households repaying a loan. Here’s what awaits you on June 1st.
1 – The right to change borrower insurance at any time
This new right is at the heart of the bill by MP Patricia Lemoine, adopted by the National Assembly in November almost unanimously. Despite intense lobbying by the banking sector and the initial rejection of this measure by senators, individuals will finally be able to change borrower insurance more easily. Quasi-mandatory, it covers all or part of the risks in the event of a claim (death, incapacity-invalidity, unemployment, etc.). Its cost is also often much higher than the amount of interest on the loan to be repaid.
So far, it is theoretically possible to deny insurance of his bank to choose a cheaper one elsewhere – or with better guarantees -, when taking out a mortgage or during the first year of his loan. A right that is renewed every year on the anniversary date of the contract. But the banks are accused of putting sticks in the wheels of their clients by taking advantage of the complexity of the legislation. According to UFC-Que-Choisir, loan insurance is a godsend for them with a margin valued at 68%. Result, they hold nearly 90% of this market, which weighs 7 billion euros in turnover per year. Only the most aiss and the most informed arrive to impose their bank the change of borrower insurance, according to Mal Bernier, spokesperson for Meilleurtaux.
To change the situation, and simplify recourse to competition, the text provides for the entry into force of the termination at any time from June 1, 2022 for new home loans, and especially from September 1, 2022 for borrowers who are already repaying their credit. According to estimates by the UFC-Que Choisir association, the adoption of termination at any time will make it possible to redistribute some 500 million euros to borrowers from the first year.
On average, a borrower will save 50 euros each month by denouncing the banking contract to subscribe to a cheaper alternative formula, guarantees at least equivalent, underlines Astrid Cousin, spokesperson for the broker Magnolia. Over the remaining term of a mortgage, the gain can increase to several thousand euros. A couple in their forties, with a loan of 250,000 euros, can reduce the cost of their loan by 31,500 euros simply by changing insurance after 3 years.
How do I request a change of insurance?
The insurance substitution request will no longer have to be made only by registered letter or by electronic registered mail. Article L113-14 of the Insurance Code provides that it can be done:
- by letter or other durable medium;
- by declaration made at the head office or at the insurer’s representative;
- by extrajudicial act (by bailiff therefore);
- when the insurer proposes the conclusion of the contract by a distance communication mode, by the same mode of communication;
- by any other means provided for in the contract.
The recipient must then confirm receipt of the notification in writing.
In concrete terms, once the request has been sent by the borrower, the bank is entitled to refuse it within ten working days of its receipt for insufficient level of guarantee. The reform provides that the insurer must in this case include all the reasons for refusal, and possibly the missing information and guarantees.
If accepted, the banker has 10 working days, from the receipt of the substitution request, to draft its rider. In practice, for a request for insurance substitution in the year following the granting of the loan, the insured will change insurer in the month following his request. On the other hand, for any change of insurance more than one year after the start of the loan, there will be a period of 2 months before the implementation of the new insurance.
Penalties provided
In the event of an out-of-time response, no response or an attempt to mislead the customer, lenders and insurers risk a fine of 3,000 euros for a natural person and 15,000 euros for a legal person according to the current reform.
Other novelty: the information obligations of policyholders on their right of cancellation are reinforced. Insurers will therefore have to inform them each year of the existence of this right and its implementation methods.
Save on your loan insurance
2 – The medical questionnaire partly deleted
at the initiative of the senators, the health section of the bill has been beefed up. the medical questionnaire is thus deleted for more than half of mortgages. The health questionnaire is the document that must be completed to conclude the loan insurance contract. It allows insurers to establish the profile of their customers, assess the risks and apply appropriate pricing or even refuse cover. For people with an aggravated health risk, this results in exclusion or overpricing, which can also prevent them from carrying out their real estate project, explains Astrid Cousin.
Real estate credit: questions to ask on the health questionnaire
This abolition of the health questionnaire, the entry into force of which is scheduled for June 1st concerns loans for which the amount of the insured portion is less than 200,000 euros and for which the term occurs before the borrower’s 60th birthday. The ceiling of 200,000 euros is well understood per insured quota. A couple can therefore borrow 399,999 euros if the quota is 50% on each head. However, the financial situation of the co-borrowers must be similar for the distribution to be equal. Depending on the income of each, the quota is adjusted, to obtain a total of 100% minimum of the amount borrowed. In any case, whoever bears the highest quota will not be able to borrow more than 200,000 euros, explains Astrid Cousin.
Real estate credit: am I required to be 100% insured?
The current regulations fixing in principle the duration of repayment of any mortgage loan at 25 years maximum, the end of the medical selection will concern in the first place young people under 35. But the fact of removing the health questionnaire is also excellent news for older candidates with a substantial personal contribution who do not need to borrow more than 200,000 euros, continues Astrid Cousin.
The abolition of the medical questionnaire will allow those who have a health problem or who have had one in recent years – not to not be subject to warranty exclusions or additional premiums which would significantly increase the insurance rate, with all the consequences on the cost of credit of course, but also the debt ratio and the APR (annual effective annual rate) which, if it is too high, can lead to a refusal of a loan because of the very low level of wear and tear rates abounds Sandrine Allonier, spokesperson for Vousfinancer.
What are the consequences for smokers and athletes?
Is the abolition of the medical questionnaire good news for smokers who can pay up to twice as much for their insurance as non-smokers? Ditto for people practicing a sport risk who are also applied additional premiums and limits of guarantee? The reform provides that no health status information nor can any medical examination of the insured be requested by the insurer.
But according to a specialist interviewed by MoneyVox, the fact of smoking, or having a sports practice, would be more a habit of life than a question of health strictly speaking. In other words, the end of the medical questionnaire, subject to respecting the criteria for this deletion, would not change anything for them. The insurer could thus continue to ask them if they smoke or if they play a risky sport. As a result, they would have to continue paying more for their loan insurance.
3 – The period of the right to be forgotten revised
For sick people who will not meet the criteria for the abolition of the medical questionnaire, the reform provides another major advance. The period of the right to be forgotten for cancers and hepatitis C is reduced from 10 to 5 years.
The right to be forgotten now allows former cancer patients to no longer have to declare their illness to their insurer 10 years after the end of their therapeutic protocol and therefore do not pay a premium. This period is therefore divided by 2, as is already the case, recently, for cancers occurring before the age of 21 years.
Immo credit: end of premiums for some sick buyers
But that’s not all: in the 3 months following the promulgation of the law, discussions must be re-engaged by the State, the professional federations of insurance organizations and credit institutions, and associations representing sick people. and consumers, in order to increase the number of beneficiaries of the right to be forgotten who suffer from pathologies other than cancer. In the absence of an agreement, the government will have a hand in deciding, by decree, chronic diseases to which the right to be forgotten could be extended.
Your projects at the best rate thanks our comparison of consumer loans