Borrower insurance: change contract at any time thanks to infra-annual termination

Among other measures intended to make this market fairer, the Lemoine law marks a major step forward that is eagerly awaited by borrowers: the creation of a infra-annual termination right for loan insurance. What is the infra-annual termination? Who is concerned ? What are its benefits for borrowers?

What is infra-annual termination?

The infra-annual termination right allows the insured to terminate your borrower insurance contract at any timewithout charge or penalty. Before the Lemoine law, three other laws had begun to make the borrower insurance market more flexible:

  • the Lagarde lawin 2010, which authorized borrowers to take out loan insurance elsewhere than at the lending institution,
  • the Hamon lawin 2014, which made it possible to terminate the contract during the first year following the date of signature of the loan offer,
  • IBourquin amendmentin 2017, which allowed borrowers to terminate their loan insurance each year on the anniversary date of signing the loan offer.

Despite this progress, which allowed the market to gain in flexibility, the freedom of borrowers remained relative since it was still not possible to change contract outside of these situations.

With the adoption of the Lemoine law, termination at any time will become possible from June 1, 2022 for loan offers signed as of this date and from September 1 for all current contracts.

Remark : infra-annual termination only concerns insurance contracts taken out by natural persons, covering loans intended to finance real estate projects for residential use or mixed use (residential use and professional use). The guarantees of the new contract must be of a level at least equivalent to the bank’s contract.

Good news for borrowers

The measures proposed by the Lemoine law aim to put an end to the historical quasi-monopoly exercised by banks on the creditor insurance market. According to a 2020 report by the firm Actélior, group contracts and alternative contracts offered by banks together represented 87.6% of borrower insurance contractswhile the contracts offered by external insurers represented only 12.4%.

The position of strength occupied by the banks has allowed them until now to charge high prices to which borrowers had no choice but to submit.

The opening of infra-annual termination, by allowing policyholders to change their contract for a more advantageous offer at any time, aims to revitalize stagnant competition. In this more fluid market, banks and third-party insurers will have every interest in doubling their competitiveness to keep their customers and attract new ones. We can therefore easily bet on the imminent development of more attractive loan insurance offers: extended guarantees, reduced premiums, advantageous conditions… According to MP Patricia Lemoine, who initiated the bill, this measure could save between 5000 and 15000 euros to the borrowers over the total duration of the contract.

Other measures of the Lemoine law will also have the effect of facilitating access to credit for all borrowers. Of particular note is the end of health questionnaires for insured loans with an outstanding amount of less than €200,000 that end before the borrower’s 60th birthday, andextension of the right to be forgotten 5 years instead of 10 for people cured of cancer and also of hepatitis C.

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