An essential element of obtaining a mortgage may be the borrower’s insurance freely chosenthe bank no longer has the right to impose its home contract since 2010. The legislation favors the insurance proxy for the entire duration of your loan, allowing you to be covered at the most advantageous rate. The introduction of Law Lemoine in 2022 strengthen your rights by simplifying the change of contract.
What is insurance delegation?
To secure your mortgage, the bank requires the subscription of a borrower’s insurancea cover that intervenes in the event ofvagaries of life which would prevent you from honoring your debt (death, disability and incapacity, even job loss). Before Lagarde Borrower Insurance Act which came into force in September 2010, the bank had every chance to do soimpose his group contracteven though the tied sale in credits and insurance had been prohibited by the Murcef law since 2001.
The Lagarde law introduced the principle of insurance proxy authorizing the borrower a choose your contract with the organization of your choice. Provided that external insurance presents at least equivalent guarantees to those of the bank agreement, the creditor cannot refuse you the benefit of the proxy.
The Lagarde law was supplemented by the Law Hamon as of July 2014: the change of insurance was possible at any time in the first twelve months following the signing of the loan offer. And since January 2018, the annual replacement on the expiration date it was authorized by the Bouquin amendment.
Not enough ! This legislative arsenal has not allowed to loosen the grip of the banks on thehome loan insurance. 87% of contributions are collected by credit institutions, a quasi-monopoly maintained at the expense of borrower interests.
Adopted in February 2022, the Lemoine’s law puts the church back in the center of the town. Since the delegation is hardly enforceable even if the free choice of the insurance contract is registered three times, the borrower must be able change formula easilywithout date constraint.
The Lemoine Act and the Change in Mortgage Insurance
Entry into force on 1um June 2022, the Lemoine’s law profoundly transforms the possibility of change the borrower’s insurance eliminating any deadlines. The right to change at any time applies to all contracts in effect on 1um September 2022. The Hamon and Bourquin laws become obsolete, the regulatory framework for mortgage insurance is now based solely on the Lagarde law and the Lemoine’s law.
Banks’ obligations have been strengthened:
- The bank’s response to the request for termination/replacement of the insurance must take place within the deadline 10 business days.
- The bank must provide written reasons for any refusaland this, exhaustively in a single document.
Any breach of these obligations is punished with a fine of €15,000.
You also get a better information thanks to the Lemoine law 2022 :
- The bank must annually remind you of the right to change insurance at any time.
- The ISP (Standardized Information Sheet) which contains all the bank’s requirements in terms of insurance must now specify the cost of insurance for 8 years.
Lemoine’s law is also a inclusive device for sick or former sick people, in removal of the health questionnaire for home loans of less than 200,000 euros which expire before the insured person reaches the age of 60.
Savings with insurance proxy from the borrower
The interest of home loan insurance proxy is first financial. The offers offered by so-called external alternative service providers are up to four times cheaper compared to the banking group formulas. By subscribing to a delegated insurance, you realizesignificant savings and reduce the cost of the mortgage in the process.
The delegation of the insurance is difficult to implement at the time of the loan request. Taken by the time, the borrower take out bank insurance in order not to jeopardize his real estate project. The Lemoine’s law allows you to turn the situation to your advantage by authorizing the change of insurance at any timethe day after signing the loan offer, if desired.
With the Lemoine law 2022, you will save. On a loan of 250,000 euros over 20 years, the approach generates a average earnings of €15,000 if the change takes place within the first three years of the loan. Check out our Property purchasing power barometer to measure all the interest of using the Lemoine law.
Leading Borrower Insurance: Tailored Protection
The second benefit of insurance delegation is more technical. Any borrower’s insurance contract is based on two basic guarantees:
- the death benefit : in the event of premature death before the loan expires, the residual capital owed is fully repaid to the bank, the beneficiaries are relieved of debt and the property enters the inheritance.
- the guarantee of Total and Irreversible Loss of Autonomy o PTIA disability : this guarantee comes into effect in the event of total addiction following illness or accident and repays the residual capital. It generally ceases at age 65, but some contracts are more generous, such asmortgage loan insurance apr which sets the age limit for the benefit on December 31 from 71 yearsth birthday of the insured.
Depending on your profile, the bank may require additional guarantees disability (Partial Permanent Disability or IPP and Total Permanent Disability or IPT), but will systematically request the ITT provides home loan insurance (Temporary Total Incapacity for Work) if the insured is in professional activity.
Certain practices or pathologies generally give rise to exclusions on these three guarantees:
- dangerous or high-level sports
- back disorders and psychological and psychiatric diseases, known as undetectable diseases or mn.
For an additional premium, most alternative insurances offer redeem exclusions from MNOsthis option being most often subject to a minimum number of days of hospitalization.
Compete offers thanks to aa home loan insurance comparison. Whatever your profile, you find a coverage tailored to your situation at a competitive price, in compliance with the regulatory equivalence of guarantees. The loan insurance proxy allows you to be protected with customized guaranteeswhile the banks offer shared contracts to a community of borrowers, generating up to 70% margin. By signing an alternative contract, you are sure of pay the right price.
Borrower insurance mandate and usury rate 2022
The subject of the delegation of mortgage insurance would not be closed if it were not put back on track particular context of the year 2022. The rates are at a 7-year high. No more easy and cheap borrowing with rates around 1% (excluding loan insurance and the cost of securities), a level still observed last January. Brokers predict rate soon to more than 3%which in itself would not be dramatic if the usury rate it followed the same pace.
By virtue of a quarterly calculation method, the usury rates are recorded in misalignment with market rates and cause a scissor effect as lending rates rise. Result, many loan applicants, even solvent ones, are set aside due to an APR (Annual Effective Annual Rate) beyond usury. Nearly 50% of applications would be rejected, having become the attrition rate main reason for loan refusal.
The banks no longer lendor almost, and waiting for a hypothetical usury rate reform in 2023plays the insurance proxythe only leverage for do not exceed the legal threshold. By lowering the APR, the insurance taken out as a proxy can allow you to obtain your mortgage.
Also think about PEL, whose return in favor it starts with rising interest rates. If you opened a social security after August 1, 2016, you are eligible for a loan a prime rate of 2.20% (subject to holding the PEL for at least 4 years), which makes it possible to reduce the amount of the additional bank loan, offered at a higher borrowing rate.