Borrower insurance in France: more important than the interest rate?
When people talk about loans and the cost of credit, they often think straight away of the interest rate. Yet the rate is only one of the variables in the total cost of your loan — and the only one that won't be affected by changes in your personal or professional life.
Today, most loans let you adjust the amount of your instalments and the repayment period, so that your loan can adapt to changes in your situation (over periods of more than 10 years, a lot can change in our lives). This also affects the total cost of your loan, which can go up or down depending on whether you choose to increase or reduce your instalments or your repayment period.
But in the event of a serious accident, do you really know what happens to your loan? People often compare rates but very rarely insurance — yet this is where banks differ the most! Of course, it is also something whose cost or level of cover you can negotiate according to your situation, and that too has a significant impact on the total cost of your loan. Above all, choosing the wrong insurance can quickly push up the cost of your financing if, after an accident, cover is poor or there are too many exclusions. At that point, whatever the insurance doesn't cover — and that you have to pay out of your own pocket when another policy would have covered everything — will literally send the total cost of your loan through the roof!
To understand why borrower insurance matters so much, let's look at its different components.
Death cover
As the name suggests, death cover (DC) protects the borrower who has taken out a property loan, and the lending bank, if the borrower dies. It is the core cover offered as standard by all insurers. On this point you will find relatively little difference from one insurer to another.
In that case, the insurance company takes over repayment of the outstanding amount to pay off the property loan. The bank gets its money back and the borrower avoids passing the debt on to their heirs. Death cover may also pay an additional lump sum to the policyholder's heirs.
It should be stressed, however, that insurance companies do not all cover the same level of risk. Each has its own list of exclusions setting out the circumstances in which it will not repay the loan.
Insurers generally exclude deaths occurring in a high-risk job (firefighter, soldier…) or during a dangerous activity (parachuting, scuba diving…). Specialist insurers exist for these cases.
Some companies do, however, agree to cover these risks in return for an extra premium.
Total and irreversible loss of autonomy (PTIA) cover
An inseparable complement to death cover, PTIA cover also pays off the outstanding capital on the property loan, but this time in the event of Total and Irreversible Loss of Autonomy (perte totale et irréversible d'autonomie).
The definition of PTIA varies from one insurer to another. Generally speaking, it is a physical or mental state of health corresponding to the third category of disability under the French social security system (100% disability).
Following an accident or illness, the person is unable to work and needs the permanent help of another person for certain essential everyday tasks.
As for the period of cover, insurers generally cover the policyholder up to the age of 65. However, with longer life expectancy, some insurers may push this maximum age back, with or without an extra premium.
Like death cover, PTIA cover contains exclusion clauses that vary from one company to another. The fewer exclusions in the policy, the better the quality of the insurance on offer.
Disability cover
Disability cover applies to a permanent inability to work following an accident or illness, once your state of health has stabilised. The disability can be total or partial.
If this happens to you, you must report it to your insurer within the time limits set in the general terms of your policy.
The insurer will then send you a file to complete and return with supporting documents.
The cover will apply if your disability rate is one of those stated in your insurance policy. Your disability rate will be set by a doctor appointed by the insurer using a medical scale (annexed to the insurance policy).
If you disagree with the assessment of your incapacity rate, you can ask for a court-appointed expert assessment.
The disability rate is used to set the amount of the benefits paid to you over time.
Temporary incapacity for work cover
Probably the main thing to check when taking out your policy, because this is the cover that is triggered most often during the life of a loan. Temporary incapacity cover applies to a temporary inability to work following an accident or illness covered by sick leave. The incapacity can be total or partial depending on the policy and the options chosen.
Depending on the insurer, it may mean being unable to do:
- the job you were doing at the time of the accident or illness
- or any job at all.
This distinction is very important, because it can drastically reduce the cases where you are covered. It is fairly rare to be unable to do any work at all, but when you are trained in a very specific field, it isn't easy to retrain and find a new job overnight. Try, therefore, to favour policies that cover your inability to do YOUR job.
You should also pay close attention to waiting periods (franchises) and the conditions of cover for the most common reasons for sick leave. Some insurers may offer to shorten waiting periods or remove exclusions — again in return for an extra premium. Take the time to read the acceptance conditions carefully, because in insurance, whatever is not excluded is covered!
Some examples of conditions of cover that can change everything:
For sick leave due to back pain (the most common reason for sick leave in France), check that the waiting period isn't extended and that hospitalisation isn't required.
For sick leave due to depression, some insurers will only cover you if you are hospitalised for a certain period.
Small details that make all the difference on the day something happens to you!
Note:
if you go back to work (even part-time), the insurance cover stops, unless a specific clause in your policy provides cover for a therapeutic part-time return.
Insurance policies often set an age limit and a waiting period during which the insurer pays no benefit.
Warning: most insurance policies contain exclusions (for example self-inflicted injuries, dangerous sports, illness caused by alcohol or drug use).
If this happens to you, you must report it to your insurer within the time limits set in the general terms of your policy.
The insurer will then send you a file to complete and return with supporting documents.
If you meet the criteria for incapacity for work, the insurer will make your monthly loan repayments for you, under the conditions set out in the policy.
Another important point: will the insurance cover 100% of your monthly loan repayment, or only the loss of income caused by your sick leave? If you lose €300 of income a month and your repayment is €900 a month, the difference in cover over 10 months of sick leave is €6,000. It is very rare for two insurance policies on the same loan amount to differ that much in cost — which really makes you think twice about trying to save a few euros on borrower insurance when you sign your contract.
In the same vein, with strong competition between banks on rates, it is rarely possible to save that kind of money on the rate alone between two financing offers, for a loan of €150k for example.
How cover is split
Where there is a single borrower taking out death and disability cover, the insurer must cover that sole borrower at 100%.
A loan taken out by two people, however, involves splitting the cover between the co-borrowers. These are known as insurance shares (quotités). The shares are set according to the two borrowers' incomes.
While together they must cover at least the full amount of the property loan, there is no rule on how it is split: 30%/70%, 50%/50%, 55%/45%, 100% on one person…
Co-borrowers can choose whatever split they like. The larger share is usually given to the person with the higher income.
Note that, added together, the two shares must be at least 100% and at most 200%. The broader the cover (between 100% and 200%), the higher the cost of the insurance.
If the insured person dies, the outstanding amount on the loan is paid to the bank in proportion to their share. In the case of partial repayment, the monthly instalment is recalculated on the basis of the remaining capital.
This repayment then affects the farm's accounts by creating an exceptional profit, which is taxable. This is known as « tax risk ». We cover it in a dedicated article: « Le risque fiscal, qu'est-ce que c'est ? » (in French).
The cost of death and PTIA cover
The cost of death and disability cover depends on the policyholder's age, the amount borrowed, whether they smoke and their occupation. Depending on the insurer, the rate ranges, as an indication, from 0.15% to 1.5% of the property loan amount.
As for premiums, the way they are spread varies from one insurer to another. Some insurers use a decreasing system: premiums are calculated on the outstanding capital and fall over time until they are almost nil when the loan ends.
Other insurers apply fixed premiums calculated on an average cost over the whole loan — this is the system generally used by the main banks' insurance. Note that the first premiums under the decreasing system are higher than those paid under a fixed rate.
Choosing your death and PTIA cover
When you sign the loan agreement, the bank will always offer the borrower a group insurance policy. This is collective cover agreed between an insurer and the borrower's bank.
The advantages of this solution are simplified joining formalities and lower management fees. Because the risk is pooled, however, it is more expensive than an individual policy.
Since the Lagarde Act came into force in 2010, borrowers have been able to take out insurance with the provider of their choice. This is known as délégation d'assurance (choosing your own insurer).
As long as the cover offered by the insurer chosen by the borrower is equivalent to that of the group policy, the client's bank must accept it.
Because premiums are based on risk, this option is particularly attractive for borrowers that banks see as lower-risk, especially young people in good health.
The benefit of the law is that borrowers can put insurers in competition with each other to get the best offer on the market.
You can make sometimes significant savings on your insurance premium this way. Note, however, that banks have hit back by strengthening the protection offered by their group policies: with their margins on rates squeezed, they cannot afford to lose the insurance, which still lets them make a margin.
Changing insurer during the life of the loan
Since the Lemoine Act of 28 February 2022, any borrower can cancel their borrower insurance at any time, free of charge, from the day after the loan offer is signed. This right has applied to new loans since 1 June 2022 and to existing contracts since 1 September 2022.
Unbundling borrower insurance
Unbundling (déliaison) means that the insurance and the loan are no longer necessarily linked. They are two separate products that can be separated: you can choose insurance other than the one offered by the lender for your financing.
A borrower can therefore be covered by an insurer outside their bank from the start of the loan, or later, following the rules for changing insurer.
When you take advantage of unbundling, you have your loan insured by an insurer outside your bank: this is known as délégation d'assurance — delegating your loan insurance to the insurer of your choice.
Who can cancel at any time?
This right applies to individuals who have taken out a property loan to finance a home or a mixed-use property (home and business). Purely professional loans, and loans taken out by a company (EARL, GAEC, SCEA, SCI…), are excluded: changing insurer is still possible, but it depends on the terms of the loan agreement and must be negotiated with the bank.
If you have had a health problem, the Lemoine Act reduced the « right to be forgotten » (droit à l'oubli) to 5 years after the end of treatment, without relapse, for cancers and hepatitis C; the AERAS agreement extends the scheme to other conditions. In addition, no health questionnaire can be required when the insured amount does not exceed €200,000 per insured person and the loan ends before the borrower's 60th birthday (Article L. 113-2-1 of the French Insurance Code).
Why change your borrower insurance?
If you took out the group or collective policy offered by the lender, it may be in your interest to switch to an individual policy, which will reflect your profile more precisely — especially if you are young and in good health. The same may apply if you now present less risk than before (if you have stopped smoking, or given up a sport considered risky, for example).
The real benefit is for those whose policy has fixed premiums (as we saw above on how premiums are calculated), because a new policy will be based on the outstanding capital and will therefore reduce your monthly payment.
Take an initial loan of €500k over 120 months with an insurance rate of 0.36% and fixed premiums over the whole repayment period: the insurance will cost €18,000, or €150 a month. If you review your insurance when the outstanding capital is €350k over 84 months, at the same 0.36% rate, the cost will be €8,820, or €105 a month. That is a saving of €45 a month — €3,780 over the remaining repayment period.
Equivalent cover and no cancellation fees
Because you cancel your borrower insurance, the lender may not change the loan rate or the terms of the credit. Nor may it charge any fees (for example for reviewing the new policy).
Each change of insurer will only be accepted if the new policy offers cover at least equivalent to the previous one.
What does equivalent cover mean?
Each lender must select 11 criteria from a list of 18 set by the Comité consultatif du secteur financier (CCSF, the French financial sector advisory committee).
These 11 criteria are the minimum cover required if you choose another insurer for your property loan. They must be given to you in the standardised information sheet (fiche standardisée d'information) handed over with the other documents when your property loan is negotiated.
How to go about it
First, join the new insurance policy, completing the medical formalities, to obtain your certificate of membership.
Then send a cancellation request to your bank, enclosing the certificate of membership and the policy's general terms, so that it can confirm the cover is equivalent and put the change in place.
Your bank then has 10 working days to respond. It must accept your insurance policy if its cover is at least equivalent to the bank's group policy. Your bank is entitled to refuse, but it must base its decision on the CCSF criteria for equivalent cover — a grid for comparing borrower insurance policies. If the bank refuses without valid grounds, or fails to reply within 10 working days of receiving the new policy, the law provides for a €3,000 fine. The law also forbids banks from charging amendment fees for a cancellation.
Borrower insurance is taken out for the whole term of your property loan (10, 15, 20 years and sometimes more). Over such a long period, however, your family or financial situation may change. In some cases, your borrower insurance needs to be adapted, and policies suited to your new situation may exist. The Lemoine Act now lets you cancel at any time.
Article updated in October 2026 (Lemoine Act of 28 February 2022).
Sources (in French):
https://www.meilleurtaux.com/assurance-de-pret/le-guide-de-l-assurance-de-pret/questions-reponses-de-l-assurance-de-pret/dc-ptia-assurance-deces-invalidite.html
https://www.service-public.fr/particuliers/vosdroits/F21128
https://votreargent.lexpress.fr/consommation/assurance-deces-invalidite-un-sujet-que-l-on-regarde-de-loin-a-tort_1878771.html
https://reassurez-moi.fr/guide/2018-resiliez-assurance-pret-chaque-annee
https://www.mma.fr/zeroblabla/assurance-emprunteur-loi-2018.html#.W7HZcmgzbZs
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