Borrower's insurance, calculated on the basis of the capital borrowed, is always offered by the bank granting the mortgage. Given the very low borrowing rates, this insurance is currently playing a major role in the overall cost of the loan. It can account for around 30% of the cost of the loan.
At a time when the trend is to renegotiate loan terms and conditions, can you also question your insurance policy?
1/ A law in favour of the borrower
The Hamon Act and the Banking Act of 26 July 2013 introduced a favourable regime for loans taken out since 26 July 2013, with provisions that benefit the policyholder.
Firstly, borrowers have the option of cancelling their insurance contract within 12 months of taking out the policy in order to take advantage of a cheaper offer from a competitor, provided that the competitor offers similar cover.
After this period, no insurance substitution is possible, unless otherwise stipulated in the loan contract.
Thereafter, the bank must respect a maximum period of 10 days in which to refuse or accept the competing offer, on pain of incurring a fine of €3,000. It should be noted that any refusal must be justified.
Finally, since 1 January 2015, the insurance offer must indicate the APR, i.e. the effective annual rate of insurance, for greater clarity. What's more, the insurer is obliged to give precise details of the cover taken out, particularly in the event of death, disability or loss of employment.
2/ The opinion of the Financial Sector Consultative Committee
It was easy for banks to refuse a change of insurance on the grounds that the equivalence of cover was not respected.
The Comité Consultatif du Secteur Financier has clarified the situation with an opinion dated 13 January 2015, the aim of which is to avoid unjustified refusals.
A comparison method has therefore been added to article L.312-9 of the Consumer Code.
As a result, credit institutions that make obtaining insurance a key condition for taking out a loan must clearly state the nature of the cover required (total or partial loss of independence, death or loss of employment) and the percentage of cover required.
In addition, the Financial Sector Consultative Committee has drawn up a list of 18 criteria relating to so-called basic cover, i.e. death, total and irreversible loss of autonomy, invalidity and incapacity. In order to justify a refusal of substitution, the bank must select 11 criteria from the list, with the option of adding a further 4 for cover linked to loss of employment.
The criteria selected by the bank must be notified to the borrower on a personalised form.
The reasons for refusal must therefore be based on the criteria provided to the borrower. The borrower must be aware of the bank's criteria before the loan offer is made.
From 1 May 2015, credit institutions will not be able to use criteria other than those set out by the Financial Sector Consultative Committee.
