Borrower Loan Insurance for Credit Redemption
During a loan buyback operation the borrower signs a new loan agreement. Therefore, the lender will repay all outstanding credit monthly payments to the various creditors, while it will reimburse a single monthly payment that can be reduced by extending the duration of the new credit. What about the current borrower insurance? Should it be terminated to subscribe a new one? Or should we keep it and renegotiate it?
What happens to my loan insurance with a purchase of credits?
The borrower loan insurance is a guarantee for the lending organization under a credit. It covers the occurrence of problems during the repayment period, such as the death of the borrower, but also disability, illness or loss of employment. If it is not mandatory in the context of consumer credit it is still strongly recommended. When it comes to a home loan it becomes a mandatory condition set by the lender. In this case, the borrower insurance becomes a credit-related death insurance.
When buying back credits, whether they are consumer loans, a mortgage or both, the goal is to gather all outstanding loans to find a homogeneity in terms of the rate of interest. interest only in the amount of the monthly payments and the duration. Rather than accumulate several credits, it is more interesting to gather them all, with only one borrower insurance. Regarding the latter, several situations may arise. If it has been subscribed with the lender of the first credit, in this case a bank, it will be terminated automatically with the credit in progress, at the time of the prepayment. On the other hand, if it has been contracted with another insurance institution than that of the lender, the borrower may either terminate it to buy a new one elsewhere, or keep it and renegotiate it with better terms.
What are my options?
As the purchase of loans is an operation that generally extends the repayment period to obtain lower monthly payments, there is a greater risk of non-payment of maturities. It is for this reason that insurance loan borrower is highly recommended because no one is unfortunately safe from a hazard of life or accident. In the event of a hard blow, the borrower insurance will cover the repayment of the credit maturities.
The borrower has several options available to him when redeeming his credits. The borrower insurance taken out at the same time as its credit in the same financial institution is canceled automatically with the repurchase. He will therefore have to find a new organization and why not buy borrower insurance from the institution that grants him the new loan. This is the time to review the evolution of his personal situation and if it allows it to play in his favor by negotiating better terms. If, for example, the borrower has a higher salary, this may be an argument for paying less monthly payments, and if he is older, the monthly payments may increase. In short, the new features of the new credit agreement will also lead to different conditions for the new insurance. The guarantees provided must be at least equivalent to the group insurance of the borrower’s bank. The new insurance contract will have to take into account the elements of the new loan, such as the borrowed capital, the interest rate and the repayment term.
Be that as it may, at the time of writing a new borrower insurance it will be necessary to verify that the guarantees registered in the contract are identical to the previous ones. Do not hesitate to consider the offers of the new lending institution that may very well be interesting. It will be all the more convenient to subscribe for simplicity but also in case of termination in the future.
Regardless of which option you choose, you should carefully consider the insurance proposal you have received. Overly attractive offers can hide vices. It is necessary to compare the premiums, but also the deductibles and other elements of the proposed contract. The insurer will have to offer borrower insurance tailored to the needs and profile of the borrower. The group insurance offered by the lender can of course be refused. If the borrower accepts the insurance delegation, the insurer must provide the financial institution with the list of guarantees.
It should be noted that various laws passed in recent years have helped the consumer in his choice of loan insurance borrower. The Hamon law of 2014 for example, allows to terminate his insurance contract if we find cheaper elsewhere but the conditions of this new offer must be identical to the old one. As for the Sapin 2 law, it is possible to cancel one’s credit insurance every year to buy another one elsewhere. Finally, the 2010 Lagarde Act allows a group of loans to opt for another borrower’s insurance than that proposed by the lending institution.
How to compare offers?
Several solutions exist to find the best insurance possible. The borrower can first call on a credit insurance broker. This approach is doubly advantageous since it saves a lot of time because it is the broker who has access to the various establishments on the market who will take the steps and propose the offers. It also means personalized support until the offer is signed without having to move.
If the borrower does not want to use the services of an insurance broker he can very well ensure the process of comparing offers by himself. He will have to learn about the cost and extent of the guarantees offered by the next loan insurance. These two elements are essential and can vary from one offer to another. The comparison is therefore essential especially since the clauses of the guarantees are unavoidable. Pay attention to a cost of insurance too interesting but which at the end is more expensive because the periods of deficiency and franchise are high.
It should always be kept in mind that the insurance contract is cancellable every year especially if the needs change over time. Subscribing to an online borrower insurance can save money on the cost of insurance. Many tools are available to make a quick and free simulation to get an idea of the different offers. Getting quotations makes it possible to present to the lender organization offers may be more interesting. So it’s a good bargaining tool to get a lower price.
An important parameter that should not be neglected: borrower insurance represents a cost that is added to the total cost of credit. In the case of a mortgage repurchase, it is even the second largest cost of the new loan. The online loan insurance comparator is therefore an essential tool to have the opportunity to choose the right price and the conditions and guarantees most suitable for the project.