Mortgage Insurance or mortgage loan insurance is an insurance taken out in a mortgage. It is specifically on credit and it is finish when the credit balance ends. The goal is to guarantee the repayment of the loan instalments in case of life accident. After signing the mortgage, it is possible to take different assurances. These assurances are guarantees that surround the banks in order to reduce risks and prevent incidents in the repayment of the loan. Basically, it is to anticipate the accidents of life such as health problems and job loss.
Banks require that insurances have to contain a life insurance and a disability insurance against job loss. However, these assurances are highly recommended but legally, it’s not obligatory. Therefore, the fact to take out insurance allows a limitation of risks for banks and to protect against situations that could cause failure of the customer to pay its monthly instalments.
Moreover, these assurances are also an advantage for both the client and his family because they preserve significant financial difficulty if an accident of life happened. Indeed, in case of accident or illness, the insurance will allow the family to continue the payment of loan instalments and so avoid legal proceedings up the seizure of the house. Similarly, the event of death, the insurance allows the widower or widow to retain his place of residence but also prevents the heirs to bear the debts. So, to conclude an insurance contract, the Bank will ask to complete a health questionnaire, which will allow insurance companies to establish your profile, assessing the risks to your general health, medical history, your potential diseases or accidents. Some questions about your lifestyle may also be requested: occupation or sports.
After receiving the form, the bank grants the guarantee or in case of doubts, she can decide to organize some tests in order to see if you are any problem. If in the case or there a medial risk, bank can refused the mortgage or accepted but the rate will be increase.
With regards the price guarantees, they vary by banks and type of contract purchased. Some institutions base their price list on a percentage of borrowed capital (it is the method of calculating the most common if you purchase the contract of a bank group), others refer to the percentage of capital outstanding. It’s difficult to compare product in these conditions. The simplest is to compare the percentage rate which takes into account the amount of interest, compulsory insurance, guarantees and bank charges imposed by the loan.
For different types of guarantees, there are 4 types that cover insurance the insurer borrower if accidents of life. The first, the life insurance or Total and Irreversible Loss of Autonomy assures at customer in case of unable to work the outstanding capital, as they pose is indicated on the amortization schedule and within the guaranteed amount is paid to the lender. This guarantee is always required by financial institutions to obtain a mortgage.
Then, it exist Temporary Disability insurance or permanent, it is also required by banks when the loan used to finance the purchase of a principal residence. These insurance are highly recommended. They can cover the management which is (after a waiting period usually 3 months) unable to work (temporary or permanent) to work following an accident or illness. This statement is validated by a doctor when the rate of disability is superior at 66% as the security social definite.
Regarding insurance I.P.P. (Partial Permanent Disability) is validated by a physician when the rate of disability is between 33 and 66% as defined by Social Security. This option is an additional guarantee of IPT and it strengthens your protection in case of incapacity for work. It is therefore an additional argument in favour of the delegation of insurance as group contracts offered by banks do not often have that guarantee. And finally, unemployment insurance option (insurance job loss) is an option for private sector salaried and aims to pay compensation in case of unemployment.