The majority of borrowers take out insurance for their consumer loans. Optional coverage, the benefit of which may be limited.
One in four households made at least one consumer loan in 2018, i.e. close to 8 million households, according to the latest Household Credit Survey French banking establishment. Among them, more than half have also taken out loan insurance.
At Good Finance, the majority of borrowers, between 60% and 80%, take out insurance, illustrates Marc Lanvin, deputy general manager of this credit institution. A proportion that may seem high. If borrower insurance is essential in the context of a real estate loan, it is optional for consumer credit (work loan, personal, auto or even renewable).
The majority of French people own their accommodation. However, to obtain a real estate loan, the bank systematically requests borrower insurance. The French are therefore used to taking out insurance when they borrow. Hence a high penetration rate even in the context of a consumer credit where insurance is optional analyzes the Deputy Director of Good Finance.
Insurance that reassures
It must be said that this coverage is widely present in commercial discourse. Whether the consumer loan was purchased online, with its banker, at a car dealership or a large retail chain, or even in an agency of a specialized credit institution (Sofinco type or Cofidis), it is most often advisable for the borrower to take out this insurance. Marc Lanvin also advises that we generally take out loan insurance because nobody knows what the future holds.
Consumer loan borrower insurance is used, as in the case of a real estate loan, to reassure the borrower, his family and the bank. It covers the unpredictable, the hazards of life that cannot be anticipated, namely death, temporary or permanent inability to work or even job loss, continues the deputy director of Good Finance.
Indeed, which borrower is not at least worried about the idea of not earning enough to repay his credit? In doing so, spontaneously, households say that it is better and more prudent to take out insurance, just in case.
Guarantees that are sometimes difficult to play
But beware of the restrictions and exclusion cases which can complicate the activation of these covers. Insurance contracts always define very precisely the circumstances which allow the taking into account of the payment of monthly payments. Thus, for the insurer to recognize the total loss of autonomy, it is often necessary for the borrower to use the services of a third person to help him in his daily life.
What is more, the circumstances of the accident or death are also scrutinized by the insurance company. For example, claims under the influence of alcohol, following the practice of certain sports (mountaineering, parachuting …) or professions deemed to be at risk (firefighter, sailor, stuntman or even money conveyor) are not covered. According to the information documents and insurance notices consulted, incapacities linked to depression or a psychiatric condition are also excluded.
Borrower insurance can also cover loss of employment
Again, behind this vague expression hides a very precise definition. In this context, the insurer replaces the borrower only if the latter was previously employed on a permanent contract. In addition, he must have been dismissed and as such receive an unemployment allowance.
In fact, people on fixed-term contracts, or whose employer terminated the contract during the trial period, or who resigned, or who could not claim compensation from Pèle Job may void this warranty. We respect our duty to advise. This is why, depending on the borrower’s situation, if he is inactive for example, our algorithms do not offer him the job loss guarantee, says Marc Lanvin of Good Finance.
In addition, borrower insurance does not activate immediately. Beyond this, a deductible of 30 to 90 days is applied. During this period which can therefore reach 3 months therefore 3 monthly payments of credit to the borrower will have to repay the consumer loan by his own means. In addition, with regard to the loss of employment guarantee, it is only acquired after a waiting period, 6 months in principle, according to the insurance notices that we consulted.