The setbacks can unfortunately happen faster than we think. What would you do if you were no longer able to pay your credit due to an accident, loss of work, or other? Additional insurance linked to your loan can save you and your family from the consequences of not paying a loan in these tragic situations. Read here all you need to know about these insurances.
What is credit insurance?
This is a guarantee that protects the borrower, and indirectly the lender, from the consequences of non-payment of a loan in the circumstances set out in the contract. This type of insurance is usually offered by the lender when the loan is taken out and guarantees various risks, such as death , loss of income, disability, illness.
The most common are:
- The outstanding balance insurance: in the event of the death of the borrower, it allows the assumption of unpaid amounts of the loan. The relatives of this one are thus protected and will not inherit his debts.
- Loss of income or guaranteed income insurance: it will pay all or part of the monthly loan payments during the period in which the borrower suffers a loss of income, particularly following the loss of a job because of illness, incapacity for work or disability.
Is it useful to buy insurance on a loan?
As part of a consumer credit, supplementary insurance is optional. It is nevertheless very useful to cover the unexpected. The larger the loan amount, the better it will be to buy one.
As part of a mortgage loan, the lender will often require you to purchase a balance insurance remaining due. Banks also offer favorable conditions on the loan s i you purchase this insurance in combination with your loan. The advantage for them is that it guarantees their repayment. It is more than advisable to subscribe to this type of insurance especially for mortgages which generally relate to substantial amounts and are of long duration.
Is it possible to benefit from tax advantages by taking out insurance as part of a credit?
In general, the outstanding balance insurance gives rise to a tax reduction. Nevertheless, certain conditions must be met:
- The insurance must have been taken out before the age of 65 for men and 60 for women.
- The minimum duration of the loan must be 10 years.
- The sum insured must correspond at least to the capital borrowed.
- The insured must be the borrower and the beneficiary a parent to the second degree or a cohabiting spouse.
Subscription to the outstanding balance insurance can therefore result in either a tax reduction for home savings or an increased reduction for long-term savings.
Where to buy insurance as part of a loan?
It can be offered by the lender, a third party insurance organization or by the public authorities.
- At your lender: he will offer you insurance (optional) at the conclusion of your loan. As part of a mortgage loan, he may require you to take the outstanding balance insurance and will usually offer you a better rate on your loan if you take it home. But he will not be able to cancel the loan if you decide to subscribe elsewhere.
- From a third party: this will allow you to compete and get a more interesting insurance premium.
- From the public authorities in Wallonia and Flanders: as part of a mortgage loan , they can provide you with a loss of income insurance free of charge, to cover events such as involuntary total loss of employment or total and involuntary incapacity for work. This is often under certain income conditions, etc. This insurance must be cont r cohosh in a limited time following the conclusion of the mortgage, which must be designed to buy, empower, restructure and build a home. There is currently no free insurance in the Brussels region, but there are:
- In Flanders: the insurance “Verzekering Gewaarborgd Wonen” must be contracted during the year following the use of the capital. It is valid for 10 years. For more information, do not hesitate to see the other conditions on their website
- In Wallonia: this insurance must be concluded within 6 months following the conclusion of the credit. It covers the repayment of the loan up to 6,200 euros per year for a maximum duration of 3 years. Loss of income must occur in the first 8 years of the credit. For more information, do not hesitate to see in more detail the conditions on their website
What are the conditions for taking out insurance under a credit?
Here is a non-exhaustive list of conditions that may be related to insurance in combination with your credit:
- A minimum amount to be insured
- A health questionnaire and, in some cases, a medical examination. For older people and for borrowers with a high medical risk (illness, disability), the insurance premium is likely to be higher than for others, since it is calculated in particular according to the risk to be insured. . Indeed, if you suffer from health problems, you are more likely to get sick and therefore to be defective.
- An insurance period of the same length as that of the loan with which it is associated. The borrower has the choice in terms of payment of the premium: single payment or the spread of payment of the bonus integrated into the credit.