What is outstanding balance insurance?
Outstanding balance insurance is life insurance taken out as collateral for a loan.
When taking out a loan, you can take out insurance in order to protect your partner, heirs or relatives in the event of death. As such, if you die before your loan is fully repaid, this insurance policy will pay the outstanding balance of your loan or part of it to your lender.
Please note! It is not a compulsory insurance. Nevertheless, it is a fact that most lending institutions require, for large loans (e.g. mortgage loans), that the insurance policy is taken out in order to have an additional guarantee.
Even though the lender requires such insurance to be taken out when the loan/credit agreement is concluded, it cannot oblige you to take out the insurance policy with an insurer of its choosing (cf. Article VII.146. § 2 of the Code of Economic Law). However, in the case of a mortgage loan, the bank may grant you a rate reduction if you take out the policy with the insurer it designates. In this case, if you change insurers, you will lose the discount. On the other hand, the lender cannot cancel your loan agreement, if the outstanding balance insurance is taken out with another insurer.
The premium
The insurer sets the premium for outstanding balance insurance.
However, outstanding balance insurance can be very expensive depending on the state of health of the prospective policyholder. Indeed, the health situation and history of the insured party are among the elements that will determine the insurance premium.
Check the insurer's website! The insurer publishes on its website the criteria it uses for the segmentation applied regarding acceptance and pricing (art. 45 law 04.04.2014) and also explains the reason for using these criteria for this segmentation.
The insurer will always justify the premium. Indeed, in its quote it also mentions the segmentation criteria it used to determine the pricing conditions.
If you believe that the premium charged for the outstanding balance insurance is clearly excessive, you have the option of consulting different insurers to obtain a quote that will allow you to compare. You can do it yourself or through an insurance broker.
Check whether you can benefit from measures to facilitate access to outstanding balance insurance.