Borrower Insurance: Adjustment of insured parts during the loan period

Borrower Insurance: Adjustment of insured parts during the loan period


How to Modify a Borrower’s Insurance Shares (Image credits: Adobe Stock -)

Since life is full of unexpected events, you may need to adjust the shares insured under your home loan insurance. But is this possible? How to proceed?

What are the insured shares?

This is the percentage of the mortgage that will be covered by insurance if a borrower defaults.

It can be freely distributed between the two parties provided that its addition amounts to at least 100% and at most 200% of the mortgage.

Thus, for a €100,000 mortgage, Borrower A can be covered up to 70% and Borrower B up to 30%.

If Borrower A defaults – for example due to disability following an accident – the insurance will cover 70% of the loan, i.e. €70,000.

Borrower B must, in turn, repay the remaining €30,000.

On the contrary, both borrowers can be covered at 100%. If one of them fails, the borrower’s insurance will cover the entire credit, that is, 100,000 euros.

How are the insured’s shares adjusted in the context of credit?

In general, you need a mortgage for a fairly long period, between 15 and 25 years, and of course many changes can occur, making it necessary to adjust the insured stakes initially when purchasing your property.

This is theoretically possible, provided you get the approval of the lending institution and the insurance company.

The first scenario, you want to increase the insured quota. You have a good chance of getting the consent of the different parties to modify your contract because from the point of view of the bank you will be better covered, and from the point of view of the insurance company you will pay higher monthly payments.

Things get more complicated if you want the stakes to be revised down or if a borrower wants to take over the entire mortgage and thus secure the borrower – for example in the event of a divorce.

In this case, if your bank and/or insurance company rejects the changes you are requesting, you can resort to terminating your contract to get a new one that better suits your new situation.

Stephen Kinnard (redaction@boursorama.fr)

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