At a time when mortgage rates have never been so low, many are thinking of owning or investing in the rental. Yes, but how to take the plunge if you run the risk of becoming unemployed overnight? Answer: by taking a job loss insurance for a mortgage. Here’s how.
Should we take unemployment insurance or not for a mortgage?
Valid for the borrower, the co-borrower and the surety, this contract will allow you to receive compensation to cover part of the monthly payments.
4 major financial organizations offer an interesting job loss guarantee:
- Societe Generale.
- Agricultural credit.
- BNP Paribas.
- Crédit Foncier.
Many borrowers are wondering about the usefulness of taking out credit insurance in case of layoff
It is true that this insurance is only valid for people entitled to unemployment benefits paid by Pôle emploi. Merchants, craftsmen and liberal professions do not have access.
Is it wise or relevant to pay extra premiums under a lost-time insurance plan when you already have a home loan on your back? It’s up to you to judge, here are some elements that will help you there.
The compensation of the loss of employment guarantee
Level of taking care of your monthly payments
Unemployment insurance for a home loan does not cover all maturities but about 50%.
Let’s say that your income is 40% of the income of your tax household and that your credit term is 1,000 €.
If you find yourself unemployed, the insurer will pay you € 200 (€ 1,000 multiplied by 50% multiplied by 40%).
This amount is in addition to your rights to unemployment, knowing that these do not represent all of your income. So you will miss only 200 € to take out your unemployment benefits.
Date of payment of compensation
Attention: the compensation is not paid immediately after the declaration of your loss of employment. It can take a few months.
The features of the job loss guarantee
The waiting period
The loss of employment insurance for a mortgage is not always valid as soon as the contract is signed.
To avoid abuse, some insurers do not give you entitlement after 4 months. Others like the BNP do not include waiting periods.
Compensation does not start on the first day of unemployment.
Except for BNP, which does not include a deductible, all contracts provide a period during which you will not be compensated. This can last up to 6 months.
The compensation ceiling
Insurers all offer a relatively reasonable compensation cap for 3 months in a 12-month period or depending on the duration of your CDI.
The cost of unemployment insurance for a home loan
The contribution of the loss of employment guarantee is calculated according to a percentage applied to the capital borrowed. If it is 0.3% for a mortgage loan of € 100,000, the monthly premium will be € 25.
The best unemployment insurance in case of job loss
Of all the major players in the market, 4 of them stand out from the pack.
1. The unemployment insurance
Société Générale offers a formula for people under 65, with no deductible or waiting period.
It can be subscribed when you are under 60 years old and you work on a permanent contract. The contract gives rise to compensation of 50% of the monthly payments with a ceiling expressed in terms of days, according to the duration of the CDI.
2. What is proposing
The Crédit Agricole job loss guarantee does not start the first year and includes a 90-day deductible.
On the other hand, its compensation ceiling is relatively high: € 1,750 per month per 365-day period, for a maximum of 1,460 days. Compensation amounts to 50% of the maturity of the mortgage.
3. The offer of credit
Unemployment insurance for a BNP Paribas home loan starts as early as the 91 st day of joblessness.
The formula is relatively flexible: it is open to people under 70 and compensation is maintained at 50% when the insured returns to work part time.
The compensation limit can be up to 18 months.
4. The contract
Crédit Foncier offers a loan guarantee from AXA at a negotiated price.
You must have worked more than 12 months on permanent contracts to obtain this compensation. However, the contract does not include any deductible.
You will receive 50% of the deadlines of your mortgage loan from the first day of payment of your benefits Pôle emploi.
Amount of compensation
If you have worked between 12 and 18 months on permanent contracts, the compensation amounts to 64 € maximum per day during 180 days. If you have worked more than 18 months on permanent contracts, the ceiling goes up to 360 days.
Change borrower insurance
You have the right to change borrower insurance from the moment the new insurer offers the same guarantees as those required by your loan agreement.
In practice, you just have to give a duplicate of this contract to an insurance company to offer you a formula adapted to your case.
Of course your current insurer, which is certainly an affiliate of your bank, will not be happy. But he has no say, the law authorizes you.
Ask for a duplicate of your insurance contract, which outlines the terms of termination. Send him a registered letter with acknowledgment of receipt in accordance with the notice, and make sure that your new contract starts exactly when the old one ends.
Difficulties to settle your credit? Also read our advice sheet on the repurchase of mortgage.