Although there is no law requiring you to purchase insurance, insurance is often one of the requirements imposed by the lender, the credit agency. This is an additional guarantee in case you will no longer be able to honor your monthly payments. However, it is worth paying special attention if you want to save some money. Here are some tips that should help you choose your outstanding balance insurance.
What is balance outstanding insurance?
It is a variation of temporary death insurance which covers the amount of monthly payments remaining to be paid if the borrower ever dies. It is temporary because it only covers the duration of repayment of the loan. If this insurance is mostly taken out for a mortgage loan, other forms of loans can also be guaranteed by the outstanding balance insurance. This insurance mainly protects your loved ones and your families.
Coverage percentage, first criterion
First, your attention should focus on the percentage of insurance coverage. When you borrow for two, especially with your spouse, you have two possible choices. On the one hand, the 100/100 distribution makes it possible to cover the remaining balance due in full if one of the co-borrowers dies. The other borrower will thus be fully discharged.
On the other hand, you can arrange the insurance and share the coverage, in 50/50 or in 75/25. The remaining balance will be paid by the insurance up to the percentage allocated for the deceased borrower. The survivor, meanwhile, will bear the rest.
The premium payment method
You also have several options for premium payment. Payment in one installment consists in paying the premium in full upon signature of the contract. This mode has the advantage of being simpler to manage, without risk of fluctuation. But full payment at once can be substantial.
On the other hand, you can choose to spread the premium payment over the duration of the contract. More reduced monthly premiums, it is nevertheless necessary to be careful because the rate applied can vary in the meantime, resulting in a considerable additional cost of your credit.
The expected tax benefits
Balance insurance owed on the head of a single person always has a more attractive tax advantage. But the two-insured formula is certainly the most economical, although the premiums are not deductible.
Today there are many sites that offer an insurance simulation service. The main interest is to be able to obtain all the useful information to better compare the offers.