Defined by the expression ” Loan insurance (ADE)” in the Insurance Code, then, by digression “Death and Disability Insurance (ADI)”, ” mortgage loan insurance ” remains a terminological choice which has the merit of sufficiently describing precisely what it is. However, all these expressions are / will be used as synonyms in this dossier.
What is the role of borrower insurance?
On the borrower’s side, taking out mortgage loan insurance makes it possible to secure their credit, in the face of life’s unforeseen events. This type of credit traditionally being established over several years, even decades, it guarantees a certain protection in the event of death, disability or even loss of employment of the insured.
Better, it allows to avoid the deferral of the repayment on the family. On the side of the lender, the mortgage insurance offers him the one and only guarantee to continue to collect the monthly payments, throughout the credit.
Home loan insurance: how does it work?
For a loan to 1 borrower
In the event of the borrower’s insolvency – for reasons covered by mortgage insurance – the insurer takes charge of all or part of the repayment of the credit, temporarily or permanently.
For example, if the only borrower of the loan dies during the repayment period, the insurance he has taken out will cover the remaining monthly payments until the end of the term. Freeing his family from all obligations.
For a loan from 2 borrowers
In the event of taking out a loan with a borrower , the quota is imperatively 100%, without the possibility of modulating it, in order to ensure full reimbursement of the monthly payment; on the other hand, with 2 borrowers, it can be defined freely, subject to respecting the guarantee of 100% in total, with a precise distribution of the quota on each head!
Concretely, if one of the 2 borrowers dies during the repayment period, the coverage by the insurance will be done according to the percentage placed on his head.
For example, on the basis of an overall monthly payment of € 1000 and a quota of 75%, the insurer will reimburse only € 750, the remaining € 250 will then be borne by the second borrower.
Good to know: Traditionally, organizations carry out simulations on the implicit basis of 200% ( i.e. 100% on each head), while it is quite possible to only subscribe to a total of 150%, spread over both heads (for example, 75% – 75%)…
How to activate borrower insurance?
In the event of default of repayment, occurring within the framework of one of the guarantees subscribed (death, disability, unemployment), the borrower must send a declaration to trigger the insurance.
Sent imperatively by registered letter with acknowledgment of receipt, within the deadlines appearing in the contract, it alone will initiate the payment of the compensation provided for.