A home loan is necessarily accompanied by the subscription of borrower insurance. This cover ensures the lending institution to recover the outstanding capital in case of default of the borrower. The death guarantee is part of the mandatory guarantees.
The borrower insurance must include several compulsory guarantees: the death guarantee, the total and irreversible loss of autonomy guarantee (PTIA), the permanent and total guarantee (IPT). The insured can, however, subscribes to optional guarantees to benefit from optimal protection.
The death guarantee provides for the assumption of all the outstanding capital in case of illness or accident resulting in the death of the borrower. In this case, his heirs will not have to assume the repayment of the monthly payments. To adhere to this guarantee, it is advisable to turn to an external insurer. It should be noted that if the borrower opts for insurance different from that proposed by the bank, it can not change the interest rate of its loan or return to the conditions already agreed.
In the case of a single borrower, the death benefit will cover this single borrower. If the loan is contracted to several, it will separately cover each co-borrower according to the subscribed share. As a reminder, the portion corresponds to the portion of the borrowed capital assumed by the insurer. Generally, this distribution is made according to the income of each one as well as their contribution to the repayment of the loan. It is recommended to opt for a proportion superior to 100% in order to compensate for a possible loss of income in the event of the death of one of the co-borrowers.
The cost of this guarantee depends mainly on the age of the borrower and his state of health. Therefore, the insured future will have to complete a health questionnaire allowing the insurance company to assess its level of risk and make a suitable insurance proposal. This cost will then be calculated according to the amount borrowed.
The cost of the death benefit varies between insurance companies, between 0.05% and 1% of the amount borrowed. It should be noted that external insurers offer rates that are generally more attractive than those offered by banks.
It is possible to lower the cost of the death guarantee through a specialized banking intermediary. The latter relies on its wide network of partners to offer the best offers.