how to earn an average of €15,000 over the life of your loan?

Borrower’s insurance, also called loan insurance, makes it possible to secure repayment of the mortgage loan to the bank in the event of the borrower’s death, disability or incapacity. Changing contracts at any time and for free is now a reality since the promulgation of the Lemoine Act.

Previously, this was only possible within 12 months of signing the loan (Hamon Act) or on the anniversary date of the contract (Bourquin Act). The goal of this liberalization of loan insurance: to allow consumers to save money on their credit by playing against the competition and taking out a cheaper insurance contract. The financial gain will be more or less important depending on the situation.

Cancellation at any time and at no cost to the borrower

Competition for lender insurance ended this year with the passage of the Lemoine Act. It has been possible to terminate your contract at any time since 1eh June for all new loan insurance agreements signed from this date and since 1eh July for insurance contracts already in progress.

In addition, the borrower had to respect a notification in order not to be rejected by the bank. From now on, he must terminate his client’s contract within the month of sending his termination letter (by registered mail). And they only have 10 days left to respond to the request, either validate it or reject it.

A level of transparency has also been added by law: the bank must inform the borrower every year of his right to change insurance at any time.

The new contract must be presented guarantees similar to the previous contract (the same risks covered), which must be accepted by the bank.

A gain of €15,000 on average over the course of the loan

“The challenge of the Lemoine law is great for the consumer because 85% of loan insurance is taken out in banks by borrowers,” explains Sébastien Limousin, distribution and digital director of the April group, wholesale insurance broker. It is often necessary to take out the bank’s group insurance in order to receive a loan offer. “And these banks earn an average of 70% on loan insurance,” he adds. Given the economic news, topics related to purchasing power will become increasingly important in the coming months. »

On average, according to figures from UFC-Que Choisir magazine, by moving from a group contract to an insurance delegation (an individual contract concluded with another insurance company), the average saving for a borrower is €15,000 over the course of his loan.

“Thus, he will divide his cost of insurance by two on average, or even by three depending on the situation, for equivalent guarantees,” he says.

More savings if you are in the first half of your credit

If you have chosen to pay your borrower’s insurance contributions from the remaining due loan capital, you will pay a more expensive insurance premium at the start of the loan and cheaper thereafter, where the loan insurance in this case is linked to what you still have to repay.

“So if you are in the second part of your loan repayment with increasingly weak loan insurance, the expected saving will be less compared to a borrower in the first two or three years of his credit”, notes Sébastien Limousin from April.

In short, the closer you are to the start of your loan, the more financial interest you have in taking out individual borrower insurance.

The higher the amount borrowed, the greater the profit

The savings by switching borrowers’ insurance are also linked to the borrowed amount.

“At a similar age and health situation, the savings will not be the same between a loan of €200,000 and another of €500,000, emphasizes Sébastien Limousin. By switching loan insurance, some of our customers have saved up to €70,000 on very large borrowed amounts, around €2 million. »

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The younger the borrower, the more interesting it is to switch

The age of the borrower is also a criterion to be taken into account. “Switching borrower’s insurance is always profitable, but the savings will not be the same if you are a young couple in good health or an elderly person with a health problem,” notes Sébastien Limousin. In addition, the risks in group contracts are pooled, so young borrowers pay more insurance than they should. An individual contract will thus be more interesting for them. »

Are you cured of cancer? Is it worth it !

The Lemoine Act strengthens the right to be forgotten for victims of certain serious pathologies. A borrower no longer has to declare cancer or hepatitis C that occurred after the age of 21 to their borrower’s insurance if the therapeutic protocol was completed at least 5 years ago instead of 10 years earlier.

So, if you have been cured of cancer for 5 years, you will save money by switching borrower insurance, as you will no longer pay the extra premium linked to your previous illness.

Have you played an extreme sport? A change to consider…

Have you discovered a passion for paragliding? Some insurance companies may refuse to insure you or charge additional premiums to cover the risk.

“It is better to consult a broker to calculate whether it is really worth changing the insurance contract,” advises Sébastien Limousin from the April group.

Regardless of whether you cancel your insurance or not, in any case you must notify your insurance company of any change in your personal or professional situation, otherwise you will not receive compensation in the event of a problem…

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