Credit repurchase: consequences on borrower insurance
When taking out a loan, the lender will often ask the applicant for a guarantee which will result in the constitution of borrower insurance. A recurring question is to know what will become of the latter in case of redemption of the credit in question. Let’s review the different possible situations.
What is borrower insurance?
A borrower insurance is a loan insurance which aims to provide a guarantee to the lender. It may cover various events such as, for example, disability, illness or loss of employment. On the other hand, the basic or first guarantee will be that provided in the event of the borrower’s death.
In this specific case, the balance of the debt will be taken care of and settled by the insurance. On a strictly legal level, this insurance is absolutely not compulsory. However, it will in most cases be required by the lender, especially when mortgages.
Borrower insurance: different from death insurance?
A borrower insurance is nothing more or less than a death insurance specific to your mortgage.
“It has become relatively common to accumulate several credits simultaneously. The consequence is that the bills multiply at the end of the month and that it is not always easy to deal with them. In addition, the non-homogeneity of the different rates further complicates the matter, ”explains John Bragat , co-founder of the Lenders site.
The repurchase of credit is often an effective solution to overcome it. Generally, this action can be envisaged on any credit, even if it is unitary. The idea is to obtain more attractive conditions in terms of rate, duration or even the amount of monthly payments.
Termination of borrower insurance
When buying back credit, different situations can arise in terms of borrower insurance. If the latter was directly taken out with the lender, for example a bank, the case is trivial: the borrower insurance simply ends at the same time as the repurchase of credit. The situation becomes a little more complicated when the latter was contracted with another insurer.
The first option, in this case, is to terminate the insurance in question and to take out a new one, more suitable and at better conditions.
The second solution is to renegotiate your borrower insurance according to the evolution of your personal situation. Better wages could, for example, have an impact on the amount of monthly payments to be paid. Age will also be an important criterion likely to increase their size.
In all cases, the new insurance envisaged must provide a level of guarantee equivalent, at least, to the old one. A final option to consider is borrower insurance directly offered by the lender. Under equal conditions, it can easily be favored for obvious reasons of simplicity, both during the subscription and during a potential new termination in the future.
If the price of the coveted borrower insurance will very often be one of the main criteria, it will be necessary to be wary of too attractive offers and to take the trouble to dissect them well then to compare them. It will therefore be important to consider ultimately those which present the best compromise between the height of the premium, the deductibles offered and the other points of the contract.
In addition, thanks to the Hamon law, it is now possible to terminate your contract if you are able to prove that you can subscribe to a new one at a cheaper rate. But be careful, because in this situation, the level of guarantee can in no case be lower. Finally, the Sapin 2 law makes it possible in all cases to terminate its borrower insurance and this every year.