What is borrower insurance?
Borrower insurance is a provident insurance that is inseparable from real estate loans. It covers all or part of the outstanding capital of a loan in the event of death, total and irreversible loss of autonomy, permanent disability, temporary incapacity for work (ITT) and loss of employment. This insurance is not imposed by law, but required by the banks which grant the credits. The buyer who takes out the loan can choose between the borrower insurance offered by his banking establishment and equivalent insurance from another provider.
Borrower insurance involves obligations on the part of the subscriber. To benefit from borrower insurance, he must honestly provide the information requested when joining and agree to pay the loan insurance contributions. Since 1er June 2022 and the “Lemoine law”, the insurer cannot request any health information if the borrower’s share does not exceed 200,000 euros and if the repayment date for the loan contracted is set before the 60e anniversary. Failing this, the subscriber must complete a health questionnaire so that the lender determines an appropriate pricing.
Is borrower insurance compulsory?
No, borrower insurance is not compulsory. In the context of consumer credit (vehicle purchase, etc.), this insurance is optional. On the other hand, to finance a real estate purchase, it is almost essential. In reality, even if no legal provision requires it, banks require this borrower insurance and therefore make it a criterion for granting mortgages. In return, the insurer undertakes to cover the repayment of the loan in the event of the occurrence of certain events such as death, disability, loss of autonomy, incapacity for work or loss of employment.
The borrower is free to choose his insurance. He is therefore not obliged to accept the one proposed by his bank. Moreover, if he wishes to change, he is no longer obliged to terminate his borrower insurance in the year following his subscription or on each anniversary date. Since the law of February 28, 2022, known as the Lemoine law (law no. 2022-270), he can do so at any time and free of charge. This measure has applied since 1er June 2022 for new home loan offers and from 1er September 2022 for borrower insurance contracts currently in progress.
Hamon law and borrower insurance
Passed in 2014 and entered into force on 1er January 2015, the “Hamon law”, named after Benoît Hamon, then Minister Delegate for the Social and Solidarity Economy and Consumer Affairs, granted insurance borrowers a one-year period from the signing of a home loan to change insurance. However, this was replaced by the Lemoine law. The latter allows the subscriber to change loan insurance at any time, without notice period for loan offers issued from 1er June 2022 and from 1er September 2022 for all borrower insurance contracts in progress.
Lemoine law and borrower insurance: what changes?
Driven by Patricia Lemoine, Member of Parliament for Seine-et-Marne, the Lemoine law replaces the Hamon law: it allows you to change borrower insurance at any time after signing the mortgage, without any notice or cost. In return, the new contract must present a level of guarantees at least equivalent to that required by the bank. This law also abolished the health questionnaire requested by the lender, provided that the credit does not exceed 200,000 euros and that the total reimbursement is made before the insured is 60 years old. Finally, it reduces the legal period of the right to be forgotten to 5 years for former cancer and hepatitis C patients. After this period, these people can therefore benefit from borrower insurance at the same rates as other insured persons. The Lemoine law is applied in two stages: from 1er June 2022 for loan offers issued from this date and from 1er September 2022 for those issued before.
Lagarde law and borrower insurance: what contributions?
Promulgated on 1er January 2010, the “Lagarde law” named after Christine Lagarde, then Minister for the Economy, Finance and Employment, modified the conditions of borrower insurance for a mortgage loan and opened up to competition the loan insurance market. Previously, the subscriber was obliged to choose the insurance of the bank which granted him the loan (called “group insurance”). Thanks to the Lagarde law, the borrower can opt, before signing the mortgage, for insurance offered by an organization outside the bank. We speak of “delegation of insurance”. The only condition to be met is this: the guarantees of the alternative contract must be at least equivalent to those included in the insurance contract offered by the lending bank.