Borrower insurance · Guide
Death of a borrower: what the insurance covers and what remains the responsibility of the co-borrower
Who the insurance pays, what it does not cover, what remains to be paid by the surviving party, and the questions to ask the solicitor: the mechanics, in order.
Upon the death of a borrower, the insurance repays the lender, never the heirs, the portion of the outstanding capital corresponding to the insured share attributable to the deceased, for the guarantees subscribed and still active. The uncovered balance remains due by the surviving co-borrower, under the loan agreement they signed, and the instalments continue to be deducted during the processing of the file.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- The insurance repays the lender the portion of the outstanding capital corresponding to the insured share attributable to the deceased, never the heirs directly.
- Three cumulative conditions govern the payment: the guarantee subscribed, active on the date of death, and covering the outstanding capital.
- With a share that does not cover the entire loan, the uncovered balance continues to be due by the surviving co-borrower, on a single income.
- The instalments continue to be deducted during the processing of the death file; the indemnity arrives later, often with retroactive effect.
- The loan debt appears in the estate liabilities for its actual balance, once the insurance indemnity is deducted: it is on this balance that the solicitor works.
Upon the death of a borrower, the insurance pays the lender the portion of the outstanding capital covered in respect of the deceased, and nothing more. The remainder remains due, often by the co-borrower, on a single income. Guarantees and procedure: the borrower insurance file; the choice of the share: the share in a couple.
Death of the borrower: what the insurance settles
The fraction of the outstanding capital equal to the insured share in respect of the deceased, provided the guarantee is taken out and still active. Neither the balance, nor the other debts, nor the succession costs.
- décès
- perte totale et irréversible d’autonomie (PTIA)
- incapacité temporaire totale (ITT)
- invalidité permanente totale (IPT)
- invalidité permanente partielle (IPP)
- perte d’emploi
Article R. 313-8 du code de la consommation. La garantie décès et la garantie de perte totale et irréversible d'autonomie ont chacune leur propre définition, leur propre âge limite et leur propre quotité.
- En vigueur depuis le
- Source
- Légifrance
- The guarantee has been taken out: almost always for death.
- It is still active: each guarantee has its age limit, without any letter to announce it.
- The capital taken into account is the amount still due, not the amount borrowed.
A total and irreversible loss of autonomy already compensated has already settled the same share.
The money goes to the lender
The lender is the beneficiary: the indemnity reduces the debt. It does not pass through the heirs and is not shared.
The bank requests the documents; the insurer examines the file and decides.
What remains your responsibility
- The uncovered share: on an equal basis, half of the capital remains due, on a single income.
- The instalments during the assessment: the deduction continues, the adjustment comes afterwards.
- The accrued interest and fees, according to the contract.
- The other loans, unless there is separate insurance.
- The reduced guarantees for a rental property: the insurance of a rental investment.
Calculate your balance today
Outstanding capital, minus the covered share per person: does the instalment for the remainder pass on the remaining income?
Partially repaid loan: the co-borrower remains bound by the contract and its joint and several liability clause, not by the inheritance. Accepting or refusing the succession therefore does not settle the loan: see the solicitor, loan offer in hand, before signing anything.
The five steps, in order
- Notify the insurer in writing, with contract and loan numbers, within the deadline in the policy document (read a policy document).
- Gather the documents: death certificate, medical certificate if requested, amortisation schedule, insurance certificate with the shares.
- Inform the bank.
- Notify the solicitor, with the loan and insurance certificate in support.
- Continue to pay, keeping proof of payment.
The step-by-step guide: declare a claim.
Three moments when the cover is misunderstood
- Between the offer and the release of funds: the effective date is on the insurance certificate. In off-plan purchases, the covered capital follows the funds released.
- During a change of insurance: the old contract is terminated only after acceptance by the lender and the effective date of the new one (change insurance).
- After the age limit: there, nothing covers, in silence.
Documents missing? Ask early, in writing, for the insurance certificate and policy document from the insurer and the bank.
Insurance and succession: two matters
The indemnity reduces the debt recorded on the liabilities; transmit the insurer’s response to the notary.
- Sole borrower: any remaining balance follows each heir’s decision regarding the estate.
- Two co-borrowers: the surviving party remains bound by the signed loan.
- Indivision among heirs: exit by buy-out of the share (buy-out of the equalisation payment and release from joint and several liability).
Deadlines not to let slip
The declaration deadline is stated in the policy schedule. The deadline for taking action against the insurer derives from the Insurance Code:
Article L. 114-1 du code des assurances. Ce n'est que le principe : le même article porte plusieurs régimes plus longs, et reporte le point de départ au jour où les intéressés ont eu connaissance du sinistre s'ils prouvent l'avoir ignoré.
- En vigueur depuis le
- Source
- Article L. 114-1 du code des assurances — Légifrance
Act as if the shortest deadline were yours. Request in writing from the insurer which deadline it applies. An old refusal should be shown to a lawyer or a consumer association before being filed away.
Afterwards: take over, restructure or sell
Take over the loan alone, if the instalment remains affordable, and review the insurance:
La part assurée sur l'encours cumulé des contrats de crédit, par assuré
Article L. 113-2-1 du code des assurances. Le plafond s'apprécie par assuré, sur la part assurée de l'encours cumulé : reprendre seul la totalité d'un prêt modifie cette assiette.
- En vigueur depuis le
- Source
- Article L. 113-2-1 du code des assurances — Légifrance
Extend or restructure, with the lender’s agreement. Sell early rather than under the pressure of arrears. The instalment on a single income: the instalment formula. Have the file to be presented to the lender assessed by telephone.
Create your file to take over or restructure the loan.
This article is for informational purposes only. The activity of insurance intermediation is carried out as an ancillary activity to the intermediation of banking operations: it does not constitute an offer of insurance, nor personalised advice on a specific contract, nor a legal or succession consultation.
Sources
Read next
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- Buyout of the equalisation payment and release from joint liability: keeping the property and taking over the loan alone Equalisation payment, transfer duty, bank consent, deadlines: what you need to arrange to keep the property and take over the loan alone after a separation.
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