Why plan for outstanding balance insurance when signing a credit contract?

When you apply for a loan, you commit to repaying the borrowed amount over several months or years. If you were to die or become significantly disabled during this period, your heirs or relatives could be confronted with the unpaid balance of your credit. Outstanding balance insurance is designed precisely to prevent this situation. It settles all or part of the remaining balance so that no family member is forced to assume your debt.

When you apply for a loan, you commit to repaying the borrowed amount over several months or years. If you were to die or become significantly disabled during this period, your heirs or relatives could be confronted with the unpaid balance of your credit. Outstanding balance insurance is designed precisely to prevent this situation. It settles all or part of the remaining balance so that no family member is forced to assume your debt.

This protection is also reassuring for the financial institution granting the credit. Thanks to outstanding balance insurance, the bank or lender is covered if repayments can no longer be made. In the event of a serious incident affecting the borrower, the insurer steps in and repays the balance according to the conditions of the policy, limiting the risk of default for the lender.

Taking out this type of insurance therefore serves a double purpose: it shields your loved ones from financial pressure at a difficult time and gives your lender an additional guarantee. This can even help facilitate the acceptance of your loan or improve the proposed conditions, depending on the overall risk profile.

Is the insurance a separate contract from the credit?

Yes. The company that manages the outstanding balance insurance and the institution that grants your loan are legally distinct and independent entities. As a result, your credit agreement and your insurance policy are two separate contracts, each with its own conditions, rights, and obligations.

In practice, your credit intermediary can help you compare several insurance offers or present the solution of a partner insurer. Even if the subscription is often proposed at the same time as the loan, it is important to understand that you sign a dedicated insurance contract, with specific coverage limits, exclusions, and a clearly defined insured capital.

Is it possible to take out a credit contract without outstanding balance insurance?

Legally, outstanding balance insurance is optional: no law forces you to accept this additional cost when you take out a loan. However, most banks actively seek this form of guarantee in order to limit their risk. In practice, this means that obtaining a loan without this insurance can be more complex, especially for higher amounts or longer durations.

In some cases, your lender may still agree to grant credit without insurance, but may compensate for the increased risk by offering less favourable terms, such as a higher interest rate or stricter conditions. This is why it is essential to discuss your situation with a credit expert, who can help you weigh the cost of the insurance against the protection it provides and the impact on your borrowing conditions.

How is the cost of outstanding balance insurance calculated?

The premium for outstanding balance insurance is not a fixed amount: it is calculated based on several personal and financial criteria. The primary factor is the capital borrowed, since the insurer’s potential commitment is linked to the amount that would remain to be repaid in the event of a claim. The higher the loan, the higher the potential coverage and, logically, the higher the premium.

Your age and health status at the time of subscription also play a major role. Younger borrowers in good health generally benefit from more attractive rates, while pre-existing medical conditions or advanced age can increase the cost of coverage. Insurers may ask you to complete a medical questionnaire and, in some cases, undergo additional medical examinations.

The duration of the credit and the chosen coverage formula (for example, 100% coverage on a single borrower or split coverage between two co-borrowers) also influence the final premium. A longer loan period means the insurer covers the risk over more years, which can increase the price. A credit specialist can simulate different scenarios to help you find the right balance between protection and budget.

How is the insurance premium paid?

Once you have decided to add outstanding balance insurance to your consumer credit, you generally have two payment options for the premium. Each has consequences for how your loan is structured and how much you repay over time.

• Single premium payment: you pay the full cost of the insurance in one lump sum, usually at the start of the contract. In this case, no additional amount is added to your loan capital and your monthly instalments remain strictly linked to the credit itself.

• Financed premium: if you do not wish or are unable to pay the premium in one instalment, it can be financed through your loan. The cost of the insurance is then added to the borrowed amount and repaid via your monthly instalments. This solution spreads out the cost, but increases both the total capital and the interest paid over time.

Choosing between these two approaches depends on your available savings, your monthly budget, and your long-term financial strategy. An independent intermediary can help you compare both options and understand their impact on the total cost of your credit.

Key benefits of outstanding balance insurance

Outstanding balance insurance is more than an extra cost: it is a strategic protection that can secure your project and your family’s financial stability.