French Loan Insurance
Did you know that French loan insurance can represent up to 40% of the overall cost of a mortgage?
And many clients are not aware that French loan insurance sold by banks can cost up to 50% or more than private loan insurance, yet 75% of borrowers in France still accept it.
We'll explain what this insurance is, how to be correctly insured and how to get the best rate possible.
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French banks require borrowers to take loan insurance.
The French do not believe in leaving debts behind when you go. The vast majority of French banks will require a loan insurance policy (like what the US call a life insurance policy) linked to your French mortgage and this is non-negotiable. The policy will pay off the remaining balance of the mortgage in case of death. French banks offer this product but they are almost always more expensive than using your own insurance broker - by a lot.
Exceptions can include private banks who instead of loan insurance, will require a cash deposit when the mortgage is taken to serve as collateral for the mortgage in case of default. The money will be invested in a low or moderate risk stocks or funds and can be recovered when the French mortgage is repaid.
How much French loan insurance do you need?
Most French lenders will require that borrowers have life cover for at least 100% of the French mortgage amount. When there are multiple borrowers this insurance can be split between borrowers, usually in proportion to revenue earned.
For example, for a purchase of 1 000,000€ - if one person in the couple earns 40,000 and the other person earns 60,000, the life insurance coverage could be split 40% - 60%. The first person would be covered for 400,000 (40% of the loan value) and the second person for 600,000 (60% of the loan value) in case of death. If the first person died in this case, 40% of the remaining balance of the mortgage would be reimbursed. This is the minimum coverage required.
Some clients prefer to have 100% insurance on each borrower so that the entire remaining balance of the mortgage is repaid in case of death of either party.
How to apply?
To apply for the French "loan insurance", you must complete a health questionnaire so the insurance company can assess if you qualify for the standard rates or if you would have any health issues that could merit an increase in the insurance premium. Any serious health issues must be declared at application time to ensure a payout in case of death.
Usually the health questionnaire is all that is required however for larger mortgages (over 200,000 euros), you may be required to do a blood test, urine test and electrocardiogram. This is standard for all borrowers in France, residents included. It's easiest to get this done in France as there are special testing centers paid for by the insurance companies in major French cities that offer tests in the same location in a very efficient way. It's also possible to do these tests in your home country.
Get your required medical tests done in France - consider it a free medical check up which is never a bad thing.
If you have a health issue or are difficult to insure, it's usually still possible to obtain insurance however there may be a higher rate or exclusion of cover. If you are borrowing as a couple and one person has health issues, we can often negotiate a higher percent of coverage on the other person to limit or avoid paying a surcharge on the insurance premium
Don't get "Lost in Translation"
French loan insurance linked to a mortgage is called "assurance de prêt."
The term "life insurance" in anglophone countries is known in French as "assurance décès" which literally translates to "death insurance." This product exists in France and is not linked to a mortgage. The policy pays out to beneficiaries in case of death, not the bank.
This is not to be confused with the French product "assurance vie" which literally translates to "life insurance." This is a tax optimized French savings plan used for retirement and inheritance.
Top tips:
- Be sure any French loan insurance product covers your nationality and situation. French insurance brokers and French banks are not international client specialists and often don't bother to check. We have rescued many clients from paying for insurance they could never collect on!
- If you are a non-resident, never accept a French loan insurance policy from a bank that includes unemployment. This is significantly more expensive and will never pay out to a non-resident if one day you try to collect.
- Take a French mortgage that ends by age 75. After that, the French loan insurance becomes very expensive.
Do you already have French loan insurance with a French bank?
Read about concrete examples of savings for our clients and how we can possibly save you money HERE.
France Home Finance is a fully licensed and insured insurance broker offering French loan insurance, French home insurance, French health insurance for clients moving to France.
And for French residents - we offer PER "plan d'epargne retraite" tax sheltered savings plans as a powerful tool to reduce taxable income.
With our large panel of leading French insurers, and over 20 years of experience in the market, France Home Finance is well placed to maximize your savings.