Mortgage insurance is a contract that covers all or part of the repayment installments of a loan when the borrower is unable to pay, due to death, disability, or loss of autonomy. Although no law formally makes it mandatory, almost all banks require it to grant financing. The choice of this contract determines both the overall cost of the loan and the actual level of protection in case of a claim.
Flat-rate or indemnity: the reimbursement method that changes everything
Before comparing the guarantees line by line, a technical parameter deserves special attention: the compensation method provided in the contract. This point, rarely highlighted in commercial offers, determines the actual amount paid in case of a claim.
A flat-rate contract reimburses the scheduled monthly payment, regardless of the level of lost income. If the monthly payment is 900 euros, the insurer pays 900 euros, even if the borrower is still receiving daily allowances from other sources.
An indemnity contract calculates the coverage based on the actual loss of income. If social security benefits or complementary insurance already cover part of the lost earnings, the insurer only makes up the difference. The reimbursement may then be much lower than the loan’s monthly payment.
For a borrower with good complementary coverage, the indemnity method mechanically reduces the usefulness of the insurance. The information available on mortgage insurance on Bulle Immobilière helps to better understand these differences before committing.
Guarantees of a borrower insurance contract: what the bank really requires
Banks define a list of minimum guarantees tailored to the type of project financed. For a primary residence purchase, the requirements are broader than for a rental investment.
- Death and PTIA (total and irreversible loss of autonomy): these two guarantees form the foundation of any contract. The insurer pays the remaining capital due in case of death or permanent inability to perform an activity.
- Total permanent disability (IPT) and partial permanent disability (IPP): they cover situations where the borrower retains some residual capacity but can no longer work normally. The triggering threshold varies by contract, often set at a disability rate recognized by medical expertise.
- Temporary incapacity for work (ITT): this occurs during a prolonged work stoppage, after a waiting period that can range from 30 to 180 days depending on the subscribed contract.
- Job loss: this optional guarantee covers economic dismissal. It generally includes a maximum duration of compensation and restrictive eligibility conditions.
For a rental investment, the bank often limits itself to death and PTIA guarantees, as rental income is expected to cover the monthly payments regardless of the borrower’s professional situation.
Loan insurance share: an underestimated lever
When two co-borrowers subscribe together, the distribution of coverage between them is called the share. It is expressed as a percentage and must reach at least 100% in total, but can go up to 200% (each covered at 100%).
A couple that chooses a 50/50 distribution pays less, but only covers half of the monthly payment if one of them is affected by a claim. The other half remains the responsibility of the surviving or able co-borrower.
An asymmetric distribution (70/30 or 100/60) allows for adjusting the protection based on income disparities. The share must reflect the repayment capacity of each borrower taken individually. Increasing the share of the main income provider better protects the household in case of a setback, even if the monthly premium increases.
Bank refusal to substitute insurance: concrete recourse
Since the Lemoine law, any borrower can change their loan insurance at any time, without fees or penalties. The only condition: the new contract must present a level of guarantee at least equivalent to that required by the bank.
In practice, some institutions refuse the substitution by citing a lack of equivalence of guarantees. The bank has a period of ten working days to accept or justify its refusal. This refusal must be in writing and detail precisely the criteria of guarantees not respected.
Challenging a refusal of substitution
If the bank refuses without a precise justification or invokes criteria absent from its own standardized information sheet, the borrower has several levers:
- Demand by registered mail the communication of the standardized information sheet (FSI), a document that lists the equivalence criteria retained by the lending institution.
- Contact the banking mediator, whose contact details are on account statements or the bank’s website. This free procedure generally concludes within a few weeks.
- Report the refusal to the ACPR (Prudential Control and Resolution Authority), which monitors compliance with legal obligations by banks regarding insurance delegation.
An unjustified refusal exposes the bank to sanctions. The Financial Sector Consultative Committee (CCSF) has confirmed the obligation of transparency regarding equivalence criteria, strengthening the position of borrowers against abusive refusals.
Right to be forgotten and easier access
The right to be forgotten allows former patients not to declare certain past pathologies. For cancers and hepatitis C, the waiting period after the end of the therapeutic protocol has been reduced to five years. This development, included in the AERAS system, opens access to borrower insurance for profiles long penalized by surcharges or exclusions of coverage.
The cost of mortgage insurance represents a significant part of the total cost of the loan. Comparing contracts by limiting oneself to the displayed rate is not enough: the compensation method, waiting periods, chosen share, and actual substitution conditions weigh more heavily on the final bill than a difference of a few hundredths of a point.
