When acquiring real estate, the interest rate is not the only variable to take into account financially. The insurance rate also plays a major role in the cost of credit and it is far too important to be overlooked. Therefore, in order to obtain the most competitive agreement possible, you can theoretically choose the loan insurance you want, even if it is not affiliated with the bank which decided to finance your mortgage. In addition, the law of March 17, 2014 relating to consumption, known as the “Mahon” law, now allows you to negotiate your loan insurance within 12 months of signing your loan offer and therefore offers greater power to negotiation with clients.
A little-known law which nevertheless offers a real financial opportunity! However, it is possible to save time and money up front by dealing with an insurance broker. What does the law on mortgage insurance say? So what is the power of the broker in obtaining your loan insurance? What are the advantages of choosing loan insurance? How to change insurance during the loan?
What are the laws in force for the insurance of your loan?
- Established in 2010, the law on consumer credit (article L.312-8) has changed the landscape of loan insurance. Since that day, it is now possible to use insurance delegation, i.e. to have access to an individual contract provided by a third party insurance company to the bank rather than a contract group offered by the group insurance of the bank which granted you the credit. There is only one condition to have access to this delegation: the guarantees offered by the individual contract must be at least equivalent to the collective contract.
- Congilaw (article L.312-9) : It is the continuity of the law on consumer credit but which is this time on the side of the banks. If customers have the right to request delegated insurance, banks do not have the right to refuse the individual insurance contract, as long as the guarantees are at least equivalent, as specified above.
- Mahon Law : The last one, which came into effect in 2014, allows you to change your loan insurance within the first 12 months following the signing of your loan offer. A boon for those who have missed the check mark in terms of borrower insurance and wish to change it.
How to negotiate your loan insurance?
To negotiate your loan insurance, you would have to be able to query all the insurance policies on the market, which would require considerable time. This is why it is advisable to hire a broker like Lite Lender. Thanks to a partnership established with French insurance companies, we are able to put insurance companies in competition in order to get you the best possible insurance, that is to say the least expensive compared to your profile.
Indeed, the broker will be able to judge the cost between the various delegated insurances but also between the group insurances, because if for certain profile the delegated insurance is much more interesting, in particular the young people, that is not the case each time. In addition, beyond the financial gain, the fact that the broker takes the steps for you will save you time. But what is the difference between delegated insurance and group insurance?
Delegated insurance : This is external insurance, not linked to the bank that finances your project. Since 2010, you can now obtain delegated insurance, the cost of which will be calculated according to you, your age, your state of health, etc. The contract drawn up will then be an individual contract. What does that mean ? Your personal profile will be analyzed in more detail and the proposed rate will be related to your profile only according to different criteria (see below). Going through delegated insurance reduces the cost of insurance by 30 to 60% for equivalent coverage, compared to group insurance.
Group insurance: Unlike delegated insurance, group insurance is a group contract linked to the bank in which your loan was granted. Therefore, the cost of insurance will not be related to your profile but related to the average profile of all customers who have subscribed to group insurance. If there is a majority of young profiles in the group, the insurance rate will tend to be lower than if there is a majority of people in their fifties or people with health concerns.
What are the factors that influence the cost of delegated insurance?
You should know that there are several criteria that determine the rate of insurance and make it more expensive:
- Age : in the same way as for the rate, the borrowers of less than 36 years are favored compared to the other borrowers. Indeed, the average retirement age is 63 years and the most common duration of a mortgage is 25 years today.
Insurers consider that a borrower under 36 years of age will have repaid all of their mortgage before retirement, unlike an older borrower. This is why borrowers under the age of 36 benefit from a lower rate.
- Practice of a risky job : Pilot, stuntman, sales representative… risky jobs that can lead to health problems, which makes insurance more expensive for this kind of profile.
- Travel a lot : Going over 15,000 km per year (car) is considered to be harmful to health, especially for back conditions.
- Health : being a smoker or a non-smoker also has a strong influence on the price of insurance. The harmful effects of cigarettes are also spreading in mortgage loans.
If income is not a criterion taken into account when examining the cost of insurance, it is above all the state of health of the borrower which plays a determining role. If you have a critical illness, insurance will cost more and you risk many exclusions from coverage. It will therefore most probably be preferable to move towards group insurance for the bank.
How to change insurance if necessary?
It may be that, due to lack of time, bad information or change of professional status, your insurance is not or no longer the best on the market. In this case, you have, as said before, the possibility of changing insurance within 12 months of signing your loan offer. Please note, it takes approximately 2 to 3 months for the new insurance to be effective, so do not cancel too soon.
To change insurance, you just need to get the quote for the new insurance and present it to the bank. The latter will have to accept it or align itself with the new proposal. If she refuses, she must give you a release certificate which will allow you to terminate the current contract to make room for the new contract that you wish to set up.
In conclusion, negotiating your loan insurance is extremely interesting for you financially. This can allow you to drastically lower the cost of insurance but also to have the possibility of additional cover if necessary. If changing insurance is now possible within 12 months of signing, it is best to choose good insurance from the start in order to avoid repeating the operation. Contact Lite Lender today if you wish to find insurance for your mortgage.