An essential requirement in order to obtain a French mortgage, the mortgage life insurance cover you take out with a French mortgage protects the bank and the borrower in case of death and total and permanent incapacity.
Since 2010, the Lagarde law allows borrowers to chose an external insurance as opposed to the one offered by the bank, however in reality many lenders won’t lend as they prefer the monthly life insurance is debited at the same time as the mortgage and that their group life insurance policy is taken. In the case of nonresident borrowers especially, this offers them extra security as they immediately know if the life insurance policy is no longer being paid for.
Today over 85% of borrowers are covered by the banks own life insurance policy which is often more expensive than policies provided by external insurance companies.
Thankfully, French legislations has evolved in favour of the borrower over the years, allowing them to change insurance cover by opting for an external insurance policy. The policy still has to be in France and has to offer the same cover but for people in good health and carrying low risk professions, this is generally less expensive.
Two laws enable borrowers to change life insurance policy: the Hamon law is applicable during the first year of the mortgage allowing borrowers to change at any time, or the Bourquin amendment which allows borrows to change policy on their anniversary date.
Examples of savings:
A couple both born in 1977 who borrowed 200 000 Euros, no illnesses declared, 50% cover each. Changing life insurance policy 2 months after taking out the mortgage.
Original monthly life insurance cost: 65 €
New equivalent cover life insurance cost: 30 €
Saving: 35 € per month, equivalent to 8 330 Euros over the remaining duration of the mortgage.
Example 2 :
Borrower born in 1968, office worker, no illnesses, borrowed 500 000 Euros 4 years ago for a 20 year mortgage. Changing life insurance on the 4th anniversary (16 years left).
Original monthly life insurance cost: 191.66 €
New equivalent cover life insurance cost: 126 €
Saving: 65.66 € per month, equivalent to 12 606.72 Euros over the remaining duration of the mortgage.
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