Real estate loan insurance when you are on sick leave?

A case that often comes up and for which many of you contact me: Can I borrow if I am sick?

I had the case this morning of a lady who is looking for loan insurance for her son

loan insurance,money

His son is currently on sick leave and for the moment the loan insurance of the bank grants him only the guarantees Death, Total and Irreversible Loss of Autonomy and Disability. The incapacity for work guarantee is refused. Since he buys a principal residence and must be able to compensate for the loss of income if he is on sick leave (to be able to continue to pay his monthly loan maturity), the bank refuses to grant him his ready.

Does the bank have the right to refuse to lend you if you are not covered for the work disability benefit?

Only death guarantees and total and irreversible loss of autonomy are mandatory for real estate loans regardless of the type of investment made. But then, depending on whether it is a main residence, a second home or a rental investment, the criteria of guarantees requested evolve and are reserved for each bank.

Some banks will be more flexible on the additional guarantees to be subscribed (total and partial incapacity for work, total and partial permanent disability, option back and psy disorders with or without condition of hospitalization …) others firmer. Each bank has its own criteria depending on the investment made. For information, you will find in our page by clicking here, the guarantees required by the main banks for an investment for a principal residence.

The death and total loss of autonomy guarantees are reserved mainly for rental investments because in this case, the borrower’s income is guaranteed by the rents he will receive (at least in large part). We are seeing more and more banks that also require the disability guarantee for rental properties.

For a principal residence, the death and loss and irreversible benefits of autonomy will almost always be accompanied by disability and work disability guarantees. Certain profiles of borrowers already having a large real estate patrimony or significant savings may sometimes be exempted from subscribing to the disability and disability guarantees, but the final decision is reserved for the sole assessment of the bank that will grant them the loan.

A little parenthesis to understand why the bank claims all these additional guarantees. The bank tries to make sure that loan maturities will continue to be paid if you lose half of your salary. Indeed for an employee, in most cases, the social security pays you only half of your salary when you are sick and this for a maximum of 3 years (then if you still can not return to work, social security will switch you into disability and it is the disability guarantee that will take over to pay the credit maturities). For a liberal profession or a self-employed worker, the daily allowances paid by the health insurance can even be lower than 50% (it depends on each general scheme on which depends the profession, it is thus necessary to inquire on a case by case basis). The Bank is therefore seeking to ensure that you will be able to continue to repay your credit maturities.

What alternatives are available to you if you buy a principal residence and the additional disability and disability benefits are refused?

Use the insurance delegation

In the first instance, we advise you to have your file reviewed by an insurance company other than the bank: some insurance companies are more flexible than others to insure people with an aggravated health risk, contact us, we will guide you to companies that can assure you, depending on your pathology.

Moreover, for many pathologies, and as soon as you enter into its criteria of application, the AERAS Convention makes it possible to push back the limits of the insurability of the people who present / have presented an aggravated health risk.

Note however that in this case, where the person is still off work, the insurance will not have any perspective on the consequences of the judgment, it is then possible that it adjourns its decision, proposing re-study the file, once the person has resumed his activity.

See if you have a professional pension plan

pension loan,money

Secondly, if no insurance has agreed to insure you, contact your employer to see if you have a pension plan that insures you to supplement your salary in case of sick leave. This is a negotiation to do with your bank because it can consider that if you get fired, then you will not have this foresight … But it’s worth a try because I saw a lot of cases in which the contract is an acceptable argument by the banks. And among other things when the borrower is an Unpaid Worker who had already subscribed to his own foresight when he was in good health. In this case, the borrower is his own employer, so there is no risk of dismissal and if the activity is sustainable (what the bank knows since it has agreed to grant you the loan), it There is no risk of filing for bankruptcy either.

Try to bring other guarantees to the bank

bank money

Thirdly, if you do not have a provident contract or if the bank refuses to take it into account, there will still be the possibility of taking another guarantee such as the surety of a relative for example or the pledge of life insurance or other savings product. You can also offer the bank to take a mortgage on your property, if the main deposit is another deposit type Credit Housing for example.

Changing Loan Insurance: A Good Example of Savings

I decided to publish now the best examples of savings made by our customers on their mortgage insurance.

This case is naturally based on a real situation recently encountered 

We quickly carried out a simulation and the answer was obvious: a gain of 9,004.95 € or nearly 42.5% on their loan insurance

loan insurance,credit

Indeed, as a reminder, loan insurance taken out with a bank can be terminated in two ways: either by invoking the Loi Hamon, which allows to change borrower insurance in the year following the anniversary date of the contract of insurance, that is to say once this first year has passed, invoking the Bourquin amendment which makes it possible to terminate 2 months before the anniversary date of the loan agreement, each year.

To review all the explanations on the borrower insurance changes, the equivalence of the guarantees, the anniversaries dates, etc.

To change loan insurance, the ideal is to go 4 months before the anniversary date of the contract

To change loan insurance, the ideal is to go 4 months before the anniversary date of the contract

We must determine this anniversary date very precisely and beware, where it gets worse, is that depending on the banks, this date is different: some take into account the date of signature of the loan offer, others the date of signing the application to join the insurance … Consult us, we will tell you precisely which date to take into account depending on the bank and your current insurance contract.

To be equivalent in terms of guarantees,had to take out the following guarantees:

  • Death
  • Total and irreversible loss of autonomy
  • Total Work Incapacity, with an option for coverage of back and psy without conditions of hospitalization
  • Total Permanent Disability, with an option for coverage of back and psy without conditions of hospitalization
  • Mr and Mrs EH were also to be insured at 100% each.
  • The profile of Mr and Mrs EH is as follows: they are both non-executive employees, non-smokers and were born respectively in 1973 and 1978.

They had 4 lines of loan to ensure:

  • A first loan of € 8,166.52 at 0% over a remaining period of 135 months
  • A second loan of € 75,900 at 0% over a remaining period of 241 months (including a deferral of 109 months)
  • A third loan from 42,049.83 € to 1.29% over a period of 125 months
  • A 4th loan from € 67,439.81 to 1.29% over a remaining term of 125 months

If they had continued with their group insurance of the bank, the sum of the insurance premiums due would have been 21 192.62 €.

Thanks to the insurance delegation, I found them a totally equivalent contract in guarantees (and even with some better guarantees), for a total of 12,187.67 €, saving 9,004.95 € or 42,5%!

So you too do not wait to contact us and make big savings on your mortgage insurance. We will search for you the most competitive contract with equivalent guarantees. You will also be able to decide if this economy is very important to choose additional guarantees or to increase your quotas to be better covered!