Do you want to buy your main residence, a second home, or invest in stone for your retirement? Good idea, but if you are approaching 50, finding financing will prove to be more difficult than expected, because credit insurance – against death, disability and incapacity for work – will cost you dearly. As its price enters into the calculation of the APR (annual percentage rate), and the latter must not exceed the wear rate, your file may no longer be fundable. To avoid this, “you have to look for insurance at the same time as a loan, because it sometimes takes time to find one at an attractive price”, advises Ludovic Huzieux, co-founder of Artémis brokerage.
In the world of credit, there are two families of insurance. The one offered by your bank is called “group insurance”. It offers similar guarantees and coverage for all borrowers, regardless of their profile. The only difference, “the price increases by age group; depending on the network, it increases beyond 45 or 50 years”, explains Ludovic Huzieux. The other type of coverage is individual insurance or “delegated” insurance, obtained directly from an insurer. The latter offers a “tailor-made” contract, the price of which is set at the fairest and which is different for each borrower.
If you are in good health, if you do not smoke and insure a relatively low amount, you can get a much lower insurance rate in delegation. If, on the other hand, you suffer from a pathology (cholesterol, diabetes), have recently had surgery or practice a sport considered dangerous, the cost of your individual coverage may not be competitive with that of the bank. In short, while delegation offers solutions, it is not a panacea.
Limited offer. 2 months for 1€ without commitment
A word of advice: whatever your choice, never focus solely on the price of credit insurance. “The contracts contain multiple clauses and are always accompanied by exclusions”, confides Jean Orgonasi, general manager of Digital Insure. For example, absolutely avoid those who refuse to cover “undeclared previous illnesses”, because in the event of a problem, your insurer could drag out the expertise so as not to reimburse the monthly payments for you. With individual insurance, it is not uncommon to find coverage restrictions for certain pathologies (back pain, depression, etc.), the practice of activities (off-piste skiing, sailing on the high seas, scuba diving , hunting or competitive sports in particular) or professions (numerous trips and stays abroad, “at risk” profession…). Finally, if you hesitate between two solutions, to make a good comparison, check the insurance calculation basis. Some establish their monthly payments on the capital borrowed, others, at the higher nominal rate, on the capital remaining due. It is therefore better to compare the total costs, in euros, before making your choice.
A few simple tips
To try to lower the bill, there are a few tricks. The first: if you are approaching the date of your birthday, take out insurance before blowing out your candles. “It is enough to set the date of entry into force of the contract the day before the anniversary date to save money”, indicates Ludovic Huzieux.
Second trick, valid if you borrow as a couple: play on the “quota” of your credit. Banks require a minimum loan coverage of 100%, mostly 50/50 on each head, or 70/30 if one earns more than the other. They often offer those who want to cover themselves more to insure the credit at 150%, for example 75/75 on each head. Thus, if one is the victim of a serious disaster, the insurance reimburses 75% of the credit and the other owes only 25% of the monthly payment. While this strategy is perfect for foresight, it drives up loan costs. An alternative is therefore to continue to cover your credit at 100% and to take out individual death and disability insurance alongside it. Disconnected from the loan, it allows you to ensure the payment of a capital to your other half if you are the victim of a serious disaster. “This strategy costs significantly less for globally similar coverage and above all the additional insurance does not enter the APR”, underlines Jean Orgonasi.
Finally, if you are borrowing to buy a rental apartment, ask your bank to insure your credit only for death and disability. Because if you find yourself unable to work, your tenant will continue to pay his rent and your savings effort will be relatively low. Please note, this calculation is only valid if you have cash to cover a rental vacancy or unforeseen costs, such as work. In the same vein, if you take out a loan for a short period when you are close to retirement, it is useless to take incapacity for work until the end, since once you receive your pension this cover will be useless and therefore… very costly.
The chronicle of Cécile Maisonneuve
Robin Rivaton’s Chronicle