Real Estate Loan Insurance: Annual Termination Is Finally Adopted
Integrated to the law, voted by the deputies, suppressed by the senators, revoted by the deputies. The adoption of the annual cancellation of the insurance of mortgage loan is far from to be a long calm river.
What is the annual termination of mortgage insurance?
It is neither more nor less than the possibility of terminating, on the anniversary date of the contract, its borrower insurance to subscribe a new one. We find the same principle of cancellation in home insurance or auto / motorcycle insurance.
Signing a loan insurance contract other than the one offered by your bank is called insurance delegation.
What laws currently govern credit insurance?
It is :
the Lagarde law (2010), which introduced the principle of insurance delegation;
- the Hamon law (2014), which allows borrowers to terminate their insurance contract within one year after signing the mortgage.
In summary, borrowers can now opt for “external” insurance, either before signing their mortgage, or up to 1 year after signing the mortgage.
The opening of the credit insurance market is aimed at fostering competition. And so to encourage borrowers to compare mortgage insurance to get the best rates.
Why is the device adopted today?
Let’s recap… Last September, the annual termination was announced and had to integrate the Sapin II law, a set of provisions aimed at fighting corruption. The text is then voted by the parliamentarians: on the one hand, the deputies vote the law by including the annual cancellation; on the other hand, senators censure this provision, arguing that it has no place in the Sapin II law.
MEPs finally have the last word… until the Constitutional Council is seized a few days later. The decision of the Sages? The integration of the annual termination into the Sapin II law is considered unconstitutional. And the provision postponed sine die.
In the end, it will not have been long before parliamentarians are working on it again. The annual cancellation is inserted in another text and voted on Tuesday by the deputies and senators.
What are the application methods?
If the annual cancellation was voted unanimously by both chambers, a stumbling block occurred during the debates: was it necessary to extend the annual cancellation to old contracts? For members, yes, but not for senators.
A compromise was finally found. New contracts signed as of March 1, 2017 will include annual termination. As for the 8 million current contracts, they will be “cancellable” from January 2018. This delay will allow banks to adapt to new market conditions. And to possibly revise down their insurance rates.
Why buy real estate insurance?
In the event of a ” hard blow ” for the borrower (disability, death, loss of employment, etc.), credit insurance covers the risks of non-payment of the monthly installments of a loan. It is not mandatory but is systematically required by banks for mortgage applications.
With the insurance delegation, it is possible to have individual rates and therefore to benefit from more advantageous insurance conditions. Do not hesitate to play the competition.