When you take out a bank loan (home loan or consumer loan) you also take out loan insurance based on your loan. But why should you take out bank loan insurance? What is its use?
THE PURPOSE OF BANK LOAN INSURANCE
Borrower insurance or bank loan insurance allows both parties to protect themselves in the event of a life event that would cause the borrower to be unable to repay (unemployment, illness, accident, death, etc.).
Often, bank loan insurance is offered directly to you by the organization or group to which you take out your loan. However, you are not required to purchase it and can research your bank loan insurance yourself or hire an insurance broker.
By looking for the best offer for your insurance, you will be able to save according to your professional situation and your age.
CHANGE YOUR LOAN INSURANCE
It is also important to know that you do not have to take out your borrower insurance with the lender, you can look for another organization that can offer you better guarantees or lower rates to insure your bank loan.
To compare the different borrower insurance offers, refer to the TAEA. This is the annual effective insurance rate, it represents the annual cost of insurance. The various insurance organizations are required to display this annual rate to simplify understanding by the insured borrower.
If you have already taken out home loan insurance, be aware that you can change your organization to insure your bank loan and terminate it within one year after signing the loan insurance contract.
LAGARDE LAW AND BANK LOAN INSURANCE
The Lagarde law of September 1, 2010 prohibits a bank from refusing loan insurance from another organization, if it has the same guarantees.
It is therefore thanks to this law that the borrower is able to take out bank loan insurance with another organization which allows competition and a reduction in loan insurance prices.
HAMON LAW AND TERMINATION OF LOAN INSURANCE
The Hamon law dated July 26, 2014 allows the borrower to terminate his bank loan insurance contract within one year of signing it. This allows you, if you have not done so, to renegotiate your loan insurance and compare different agencies for the best rates.
HOW MUCH DOES A CHANGE IN BANK LOAN INSURANCE COST?
If you have not taken the time to choose your loan insurance and compare the different offers, it is possible to change your bank loan insurance. As explained above, following the Hamon law of 2014, it is possible to change insurance and this at no additional cost if you have taken out it during the year.
Otherwise, that is to say that your contract was signed more than 12 months ago, you must first refer to your contract which will indicate the terms of termination. According to the Châtel law, you have the right to change your bank loan insurance contract after 2 years. However, you must check that your bank accepts it, indeed, some establishments reject the request because the Châtel Law would not apply to loan insurance contracts.
HOW MUCH DOES A BANK LOAN INSURANCE COST?
The cost of bank loan insurance can vary as it depends on several factors. First of all, the choice of the insurance organization but also the type of contract taken out, the guarantees, your personal information and the loan taken out.
But in addition to this, various costs can be added to these elements, such as the application or membership fees.
In general, bank loan insurance is paid monthly based on the loan made or the amount owed by the borrower. This is a rate applied to monthly payments.
But some organizations can also offer you a specific offer depending on your situation.
This is why it is highly recommended to make a comparison of the different organizations taking all the expenses into account to find the best offer.