When you take out a mortgage with a bank, your banker will ask you to insure your loan. What does this mean?

You can take out appropriate insurance to cover the outstanding amount of your mortgage in the event of your death. This insurance guarantees that the insurer will reimburse all or part of the outstanding sums. This is known as "outstanding balance insurance".

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Outstanding balance insurance

First of all, it is important to know that outstanding balance insurance is not compulsory, although it is strongly recommended, and depends on the borrower's financial situation.

Moreover, the borrower is free to choose the institution that insures him.

The outstanding balance insurance is therefore a death insurance that covers the mortgage loan. It allows the insurer to reimburse the remaining sums due, according to the percentages chosen when the insurance contract was taken out, in the event of the death of the insured.

The percentage of a loan insurance is the percentage of the capital that one wishes to insure. In the case of a loan for two people, the co-borrowers can divide at least 100% of this percentage between them, and can even choose to insure each of them for 100 % in order to be fully covered by the insurance. Thus, in the event of the death of one of the two co-borrowers, the insurer reimburses the loan in full to the bank and the remaining co-borrower no longer has to pay anything and keeps the property.

For the same situation, if the deceased co-borrower was insured for 50 %, then the insurer will reimburse 50 % of the credit, and the remaining co-borrower will continue to reimburse his share, i.e. the remaining 50 %.

This insurance is temporary and will cover you for the duration of your mortgage.. The capital insured decreases as your repayments increase.

Total and permanent disability insurance

This benefit is usually combined with the death benefit.
It will cover you in the event of total and permanent incapacity to engage in any professional activity as a result of illness or accident. The disability must be established by an expert.

These two covers (death and disability) are usually taken out in one policy but can be taken out separately.

Finally, taxpayers can deduct certain expenses incurred during the year from their taxable income. Among these expenses, insurance premiums paid are tax deductible under certain conditions.