Loan Insurance: After a death, what options for the spouse?
A death is a test, to which are added formalities and unexpected difficulties. This is particularly the case when the deceased leaves his spouse with a current mortgage. How is the problem of capital left over? Explanations with the death guarantee of the borrower insurance.
The borrower insurance in the context of a real estate purchase by a couple
When a couple decides to acquire a property through a loan, the mortgage is, in most cases, taken out by both spouses. The question of the proportion for the borrower insurance arises then. In theory, borrower insurance remains optional. In practice, its subscription is systematically required by banks for a mortgage.
On the side of the bank, the bottom line is that the mortgage is 100% insured in case of death or disability. For the borrowers, the important thing is to protect themselves at best in the event of death or disability of one of the spouses and thus minimize the financial cost of the loan for the surviving spouse.
The borrower insurance quota: a determining factor in the event of death
When subscribing to the borrower insurance, the spouses must determine the amount of the mortgage loan insurance for each of them. They have the choice between:
Quotas where the total of both spouses reaches 100% (30/70, 40/60, 50/50, etc.). In this situation, in the event of the death of one of them, the borrower insurance will pay the share of the outstanding capital corresponding to the share of the insured person who has disappeared. The surviving spouse will have to repay the share corresponding to his / her quota.
A variable portion for one of the spouses (30%, 40%, 50%, etc.) and 100% for the other spouse. This situation occurs regularly when one of the co-borrowers receives more income than his spouse. In case of death of the subscriber benefiting from a percentage of 100%, the borrower insurance will refund the entire remaining capital.
A 100% quota for both spouses. This solution, which is obviously the most expensive, however, fully protects both spouses in the event of the death of one of them. In fact, in such a situation, the outstanding capital will be repaid in full by the borrower’s insurance, be it either of the deceased spouses.
In any case, repayment by the borrower insurance does not occur immediately after the death of the subscriber. The surviving spouse must therefore continue to pay monthly mortgage payments until the reimbursement made by the insurance.