It is common to take out a bank loan when buying a property. This act requires some conditions according to the system of operation of banks. Indeed, the fact of contracting a real estate loan must be carefully thought out. In principle, the beneficiaries must be employees. So, as for the job loss insurance, is it mandatory?
Context
According to statistical data in 2018, the unemployment rate is 9.1% of the active population. In all categories combined, in the second quarter of 2018, the number of registered unemployed was 6,238,900 people in metropolitan France. And many are rushing to take out unemployment insurance through a home loan.
Job loss insurance
Definition
Also known as unemployment insurance, it is one of the guarantees of loan insurance. It is a financial coverage attached to the contracting of credit for a real estate project. The insurance aims at securing the patrimony in case of loss of employment of the beneficiary.
How it works
The job loss guarantee allows paying monthly the credit of a real estate in case of cessation of professional activity.
Targets and conditions
The guarantee applies to employees:
- Having a permanent employment contract or CDI
Nevertheless, it is quite possible for an employee with a fixed-term contract to benefit from the insurance but under certain conditions. To do so, he/she must work full-time in the company for more than 90 days after obtaining a permanent contract.
- Having seniority of 6 to 12 consecutive months at least in the company
- Under 55 years of age.
Self-employed workers, liberal professions, craftsmen, farmers, and shopkeepers cannot subscribe to the loss of employment guarantee. People in trial period or notice of dismissal will not be able to obtain this insurance either when taking out their real estate loan. The job loss insurance is activated when the employee is dismissed from his job.
For a real estate loan
The level of coverage is variable, but the level of compensation is always partial. Indeed, the amount to be reimbursed by the bank is between 30% and 80% of the monthly payments. The coverage of your monthly loan payments can be either:
Evolving over time
For example, a reimbursement of 30% of your monthly payments the first year, then reimbursement of 80% the two following years;
Fixed
The employee borrower determines the portion reimbursed by the insurer. However, the level of compensation will increase with the insurance policy.
Recovery period
The recovery period varies from 12 months to 48 months and is renewable. In principle, most insurance companies do not cover more than 18 successive months. In the case of prolonged unemployment, the person will have to start paying the monthly payments of the mortgage itself.
Is it mandatory?
The job loss insurance is not mandatory for contracting a real estate loan. Indeed, it is the only optional insurance among the loan insurances. However, it is strongly recommended. It consists in protecting the borrower’s assets in case of risk of involuntary dismissal. Thus, unemployment insurance helps the employee to pay a part of the monthly repayments of the credit contracted during a predetermined period.
Indeed, it is applicable only for a dismissal opening right to the allowances of the government. On the other hand, if the employee has been dismissed for serious misconduct, the insurance is invalid. Moreover, in case of resignation, partial unemployment, or contractual termination, the job loss insurance will not be applicable.
Note that all types of real estate loans are likely to be covered by the guarantee of loss of employment. For example, zero interest loans or variable rate loans. Finally, it should be noted that some costs directly related to the credit or insurance are not reimbursed by the insurance borrower’s job loss. These include notary fees and guarantee fees.
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