Loan insurance delegation: Is it really profitable in 2024?
Borrower insurance represents a significant expense for anyone taking out a property loan. For several years, borrowers have been able to choose insurance external to the lending bank. Commonly called “insurance delegation”, this option promises to make significant savings. Is this alternative really profitable? This article examines in detail the benefits and limitations of loan insurance delegation. What is loan insurance delegation? The delegation of loan insurance is the possibility offered to a borrower to take out insurance from an external organization, rather than accepting the group insurance offered by the lending bank. The Lagarde law of 2010 established this freedom of choice. It was reinforced by the Hamon law (2014) and the Bourquin law (2018), allowing borrowers to change their insurance under certain conditions, even after signing the loan. These two systems are now obsolete and replaced by the Lemoine law of 2022 which authorizes the change of loan insurance at any time, without time constraints. To understand whether the delegation of borrower insurance is profitable in 2024, it is important to analyze the insurance selection criteria and the differences between a group contract and an individual contract. Why choose insurance delegation in 2024? Personalized pricing Unlike group insurance which applies a standard rate to all borrowers (often based on age and the amount of the loan), insurance delegation offers individualized rates based on the borrower's profile: age , profession, state of health, lifestyle habits (smoking/non-smoking, risky profession, practice of a dangerous sport). This personalization allows young and healthy profiles to benefit from much more attractive prices. For example, a 30-year-old non-smoking borrower could obtain less expensive insurance via delegation compared to group insurance which will tend to pool risks with older or at-risk profiles. Tailor-made coverage Delegation also allows you to choose coverage that better meets your real needs. Banks generally impose standardized guarantees, sometimes excessive in relation to the borrower's real needs. The packaged formulas that we are now seeing emerge contain superfluous guarantees or guarantee extensions that the borrower cannot avoid if he wants to benefit from a competitive rate. In 2024, external insurers offer contracts which can be modulated according to the personal situation of the borrower, by selecting the relevant optional guarantees. This can result in substantial savings, especially for those who don't want to pay for coverage they believe is unnecessary. Increased flexibility with the Lemoine law The recent Lemoine law of 2022 introduced the possibility of changing borrower insurance at any time, without having to wait for the anniversary date of the contract. This new flexibility offers borrowers the possibility of quickly switching to a more advantageous contract, without timing constraints. Is it still profitable? A quantified example in 2024 Let's take a concrete example to illustrate the savings achievable with the delegation of insurance in 2024. A 40-year-old borrower, non-smoker, takes out a property loan of €250,000 over 20 years. Group insurance from the bank: The bank offers group insurance with a rate of 0.35% of the borrowed capital. Annual cost: €250,000 × 0.35% = €875 per year Total cost over 20 years: €875 × 20 years = €17,500 Insurance delegation (external insurer): By opting for an insurance delegation, the The borrower finds a contract with a personalized rate of 0.15%. Annual cost: €250,000 × 0.15% = €375 per year Total cost over 20 years: €375 × 20 years = €7,500 Savings: €17,500 (group insurance) – €7,500 (insurance delegation ) = €10,000 savings over the total duration of the loan. This calculation shows that, in this case, the borrower could save €10,000 by choosing an insurance delegation for his property loan of €250,000. Taking this simple calculation into account, insurance delegation clearly appears to be a profitable solution for many borrowers, especially those with a low-risk profile. However, this profitability is not systematic and depends on several criteria. You will find other examples of potential savings in our barometer of real estate purchasing power for November 2024. Traps to avoid in 2024 Although the delegation of insurance is an attractive option for many borrowers, it is important to keep keep certain points in mind before getting started. Equivalence of guarantees Since the Lagarde law, the bank has the right to refuse a delegation of insurance if the guarantees of the new contract are not equivalent to those of the group insurance contract. It is therefore imperative to carefully compare the guarantees offered by the two contracts. Some banks can also be picky about the details of guarantees to keep their customers on their own insurance. The equivalence of guarantees is a complex concept. Get help from a loan insurance broker to fully understand the extent of the coverage and the subtleties that are often difficult to discern for the untrained eye. Additional fees If changing insurance is now simpler thanks to the Lemoine law, some banks are resisting and threatening substitution fees which are completely prohibited by law. It is important to check the general conditions of the loan to avoid unpleasant surprises. The bank cannot increase the borrowing rate on the pretext that you are taking out insurance that competes with its own. Guarantee exclusions Risk profiles (health, profession, sports) must be particularly vigilant about specific exclusions. If all borrower insurance contracts contain the same general exclusions, each formula applies specific exclusions linked to sports practice, pre-existing illnesses and risky professions. Many individual contracts, unlike group contracts, offer the option of buying out the exclusion of certain risks which allows you to be covered for an additional premium. The delegation of loan insurance remains a profitable solution in 2024 for a majority of borrowers, particularly those with a low-risk profile. It allows you to make significant savings, access more flexible coverage and take advantage of legislative developments promoting freedom of choice for borrowers. The profitability of this solution will largely depend on the ability to properly compare offers, check the equivalence of guarantees, and anticipate possible costs or adjustments linked to insurance. It is therefore crucial to carry out a thorough analysis before making a final choice. The services of a professional are more than useful in selecting competitive insurance that matches your profile while complying with the bank's requirements.
