Mortgage Protection Insurance & French Home Loans: Understanding Requirements & Options

When purchasing a property in France, understanding the intricacies of French home loans and the associated requirement of mortgage protection insurance is essential. This guide offers comprehensive insights into the necessity of mortgage protection insurance for French mortgages, its costs, coverage, and how to efficiently arrange it.

Is Mortgage Protection Insurance a Requirement for All French Mortgage Lenders?

Yes, in France, most mortgage lenders mandate borrowers to have mortgage protection insurance (assurance emprunteur). This insurance aims to protect both the lender and the borrower against unforeseen circumstances that might affect the borrower’s ability to repay the mortgage, such as illness, disability, or death. It is however worth noting that some specialist lenders and private banks, whist strongly recommending Mortgage Protection Insurance, provide borrowers an option to opt out.

How Much Does It Cost?

The cost of mortgage protection insurance in France varies depending on several factors, including the borrower’s age, health status, loan amount, and the risk level of the borrower’s occupation. Typically, the insurance cost ranges from 0.10% to 0.5% of the total loan amount annually. A typical monthly insurance premium costs about €15 for every €100,000 of cover. It is essential to shop around or consult with a mortgage advisor to find the most suitable and cost-effective option. By law, lenders will always show the lifetime cost of a mandatory insurance policy in a legally binding credit agreement. One measure used for this is the Annual Percentage Rate of Charge (APRC). The APRC shows, as a percentage, the annual cost of a mortgage over its lifetime. It incorporates all relevant charges including insurance premiums that relate to the mortgage borrowing.

What is Covered?

Mortgage protection insurance in France can cover death, total and irreversible loss of independence, disability, sickness cover and sometimes loss of employment. The exact coverage will depend on the lender’s requirements and obviously on the borrowers’ needs. details can vary significantly between insurance providers, so understanding the specific terms and conditions of your policy is crucial.

Base guarantees will always include Death and Total Irreversible Loss of Independence (TILI). Optional guarantees can include Total Permanent Disability (TPD) Partial Permanent Disability (PPD) or Temporary Work Disability (TTWD).

In the event of death, TILI, TPD or PPD, the insurer will pay the Beneficiary the amount of capital guaranteed on the day of the occurrence. In the event of the Insured experiencing Total Temporary Work Disability, the Insurer shall pay the Daily Compensation amounts featured in the contract’s.

How Do I Arrange It?

Arranging mortgage protection insurance can be done through your mortgage lender or independently through an insurance company. While lenders often offer their insurance policies, borrowers are not obligated to accept these policies. Since October 2010, the French banking system has allowed borrowers to choose their insurer through the “delegation of insurance,” provided the alternative policy offers equivalent levels of cover to that of the lender’s offer.

How Long Does It Take?

The time required to arrange mortgage protection insurance depends on various factors, including whether you’re applying through your lender or independently. The process can take anywhere from a few days to a few weeks. It is advisable to initiate this process as early as possible to prevent any delays in your mortgage approval.

Do I Need to Take Medical Exams?

Depending on your age, health status, and the insurance provider’s requirements, you might need to undergo a medical exam. Generally, for significant loan amounts or if there are specific health concerns, insurers will request a medical examination to assess the risk more accurately.

In conclusion, while mortgage protection insurance is a requisite for securing a French home loan, its benefits extend beyond mere compliance. It offers borrowers peace of mind, knowing they and their loved ones are protected against unforeseen financial burdens. By understanding the requirements, costs, and coverage options, and by exploring the insurance market, prospective homeowners can ensure they find a policy that best suits their needs, offering both security and affordability.