All credit comes with loan insurance . This is the only way for a bank to protect itself against the risk of unpaid debts in the event of death, illness, disability or job loss.
This loan insurance has a strong impact on the cost of credit. However, since the Lagarde law, it is possible to resort to a delegation of insurance, that is to say to choose another insurer than the one proposed in the loan file. To calculate the rate of his loan insurance, many criteria come into play. Which ?
The criteria used to calculate the rate of loan insurance
The amount of the annual loan insurance premium varies according to the age of the borrower, his or her medical history, the occupational risks to which he is exposed and the duration of the loan. The risks involved in the practice of certain sports are taken into consideration.
Note that the AERAS convention gives the right to be forgotten in case of a history of serious illness: for cancers and liver diseases, it is thus possible to take out insurance between 5 to 10 years after the end of the care protocol According to the case.
The calculation of the rate of loan insurance
The group insurance offered by the bank is calculated on the amount of capital borrowed and has repercussions for the duration of the credit. To find out the cost of insurance, multiply the rate of insurance by the borrowed capital and divide the sum obtained by 12 (the 12 months of the year). It is included in the TEAG (global annual effective rate).
The individual insurance, in the case of the insurance delegation, is calculated on the basis of the outstanding capital. The premium is therefore recalculated every year at maturity and visible on the depreciation schedule. This means that the cost decreases as payment is made. One caveat however: the older the borrower, the greater the risk of a health problem. But this is weighted by the calculation of the insurance premium on lower capital.
Individual insurance therefore remains more advantageous.
To counter this mechanism, some banking organizations lower the interest rate of borrowed capital to offset insurance costs.