When granting credit, the bank requires borrowers to purchase insurance against death, disability and disability. The share of the home loan insurance contract represents the share of each spouse.
What choice for your contract?
The contract is mandatory and must be at least the amount of capital borrowed. In the case of a single borrower, the question of the share does not arise since the latter will necessarily be insured at 100%.
The insurance portion of a home loan is assessed on the one hand according to the financial and professional situation of each borrower and on the other hand according to the level of protection of the couple in terms of pension. This is the only way to spread the risk equitably between the two borrowers.
If you have not yet established a pension plan, it may be time to take stock with your insurer.
Remember to check with your company if you do not already benefit from collective contracts, which is often the case for executives and most employees of large companies.
Moreover, it is necessary that the insurance portion of each borrower corresponds to the share of each in the overall income of the couple.
Thus, if one of the two co-borrowers contributes up to 80% of household income, its share in the mortgage insurance contract must be the same level.
But to be sure of making the right choice, borrowers can ask themselves the following question: Can I pay the monthly installments of my credit if my spouse dies?
In addition, if you are in the case of a couple without children, think that your family is going to be enlarged.
It is therefore necessary to provide that in the event of the death of one of the two borrowers, the surviving spouse will have to face higher expenses than today.
Finally, be aware that the bank may well require that the quotas respect the level of income of each borrower.
Thus, if your advisor does his job well, he will refuse to let you choose a 50% quota on each head, if one of you wins 80% of the couple’s income.
Some examples of quotations
Elements of the loan
Take the example of a couple of borrowers who subscribe a loan of 200,000 euros over 25 years to 4.20% and credit insurance on capital borrowed at a rate of 0.30%. The monthly loan amount excluding insurance will be 1078 € per month.
Situation of borrowers
As can be seen, the choice of a 50% share on the head of each insured would have serious consequences in case of death of the gentleman. Madame could not then face the expenses alone and her debt ratio, which would then be more than 51% would put her in a situation of over-indebtedness.
On the other hand, the comfortable salary of Monsieur allows with a proportion of 30% on the head of Madame to face deadlines in case of death of the latter.
In conclusion, the proportion 70/30 corresponds to the strict minimum to respect the rate of legal indebtedness if a disaster occurred. But once paid the monthly loan, Madame would be in great difficulty, his remaining life is only 727 €.
In our example, the recommended minimum mortgage insurance ratio is 100% for Mister and 30% for Mister.
The operation of guarantees
Remember that in the event of death or total and irreversible loss of autonomy (third category of social security), the insurer will pay the outstanding capital, while in case of total permanent disability (2nd category of the security social security) or temporary incapacity for work, the latter will pay the monthly installment.
In both cases, the reimbursement will be at the level of the insurance coverage chosen for each insured.