Many investors must take out a mortgage to finance their home construction project. But did you know that to secure this commitment, most banks require borrower insurance  ? Still too often considered a formality, this coverage nevertheless plays a key role in the event of a disaster. Death, disability, work stoppage… insurance takes over to repay all or part of your loan. We explain how borrower insurance works, the guarantees offered, and the subscription procedures to secure your investment.

What is borrower insurance?

Borrower insurance is a contract taken out to guarantee the repayment of a mortgage loan in the event of life’s accidents. If you, as the insured, experience a serious event (death, total loss of autonomy, disability, or work stoppage), the insurance covers all or part of the outstanding capital or monthly payments.

This loan insurance therefore acts as a safety net for both the borrower and the bank. There are two main categories: group insurance offered by the bank and individual insurance, which is often more flexible and taken out with another insurer.

Is it mandatory to obtain a mortgage?

The law does not directly require this insurance. But in practice, no banking institution will grant you a loan without being certain of being repaid. Borrower insurance is therefore almost systematic . However, you are free to choose the insurer of your choice, provided that the guarantees are equivalent to the contract offered by the bank. This is called insurance delegation .

What guarantees are included in a borrower insurance contract?

Insurers can offer several guarantees in their mortgage loan insurance contract . Generally, we find these:

Death benefit

This guarantee is always included, regardless of the type of contract. It protects the family and prevents heirs from having to bear the debt.

It applies when the insured is recognized as totally and permanently unable to work and requires assistance with daily living activities. A detailed medical opinion is required for compensation. A medical advisor from the insurance company may even be asked to assess your disability level.

Permanent disability insurance

This guarantee can be total (IPT) or partial (IPP) . The disability rate is determined by a medical expert, according to a precise scale.

The ITT (Temporary Incapacity to Work) guarantee

This applies to work stoppages due to illness or accident. As long as the insured person is unable to work, the insurance reimburses the monthly payments. Please note that there is often a deductible period (generally 30 to 90 days) before compensation is payable. For self-employed people, retirees, or homemakers, this benefit may not be activated.

The loss of employment guarantee

This is an option. It covers redundancies, but not resignations or the end of fixed-term contracts. The conditions are strict: you often need to have a permanent contract for at least 12 months. The coverage is partial and limited in time.

Borrower alone or in pairs: how does the share work?

The share refers to the portion of the capital insured by each borrower. In the case of joint borrowing, it is possible to split the coverage (for example, 50/50) or to insure each borrower 100% if the bank requires it. A well-chosen share effectively protects both parties.

The duration of the loan

Premiums can be calculated on the initial capital (fixed contribution) or on the remaining capital due (decreasing contribution). The second model is often less expensive over time.

Subscription: what are the steps to follow?

Before obtaining an agreement, the insurer assesses the risks. You must complete your loan insurance application. A medical questionnaire is required, except for certain loans of less than €200,000 with repayment before age 60, according to the Lemoine law .

In the event of increased risks, the AERAS agreement allows access to insurance despite a past or current illness.

After acceptance, the contract is signed. It takes effect on the date agreed with the lending institution.

Yes. Since 2022, the Lemoine law allows you to cancel your policy at any time . Changing insurance can reduce your premiums while maintaining the same level of coverage. To do this, you must submit a new policy with equivalent guarantees and obtain the bank’s approval within a maximum of 10 days.

What should you pay attention to before signing?

Each contract has its own subtleties. You must carefully read the warranty exclusions , waiting periods , deductibles , coverage duration, and check whether all the guarantees are well suited to your personal and professional situation.