Outstanding balance insurance: what it is for and how to choose it

When you sign a mortgage, the lender almost always mentions outstanding balance insurance. It takes up one line in the offer, but it determines how well your family is protected and it weighs on the cost of your project. Here is what it is and how to choose it.

What it is for

If the borrower dies before the end of the loan, outstanding balance insurance repays all or part of the capital still owed. The amount is paid to the lender, and your family keeps the home without having to take over the payments. Without it, the heirs, or the co-borrower alone, would have to keep repaying or even sell the home.

It is not compulsory by law, but most mortgage lenders require it, so in practice it is part of the file.

One life or two, and the share covered

For a loan taken by two people, we speak of cover on two lives. Each borrower then chooses a share covered (quotité in French), which is the portion of the capital for which they are insured. The split can be equal, 50% each, or different depending on the weight of each income in the repayment.

A qualitative example: if one of the two borrowers brings in most of the income, a higher share on that person protects the survivor better, who could not have handled the payments alone. Conversely, 100% on each life reassures more but costs more. The right balance depends on your family situation and on what your budget can carry alone.

For a single borrower the question does not arise: they are covered at 100%.

Constant or decreasing capital

The insured capital can stay constant for the whole term, or be decreasing and fall in step with the outstanding balance. The decreasing formula follows the actual debt, which makes the premium lower. The constant formula guarantees the same capital from start to finish and mainly suits loans whose capital does not fall during the term, such as a bullet repayment loan. For a classic loan with constant payments, the decreasing formula is usually the fitting one.

Single or periodic premium

The premium can be paid in two ways. With a single premium, you settle everything at the start, sometimes by including it in the financing. With a periodic premium, you pay every year, half-year, quarter or month, depending on the insurer. A single premium increases the amount to finance, while a periodic premium weighs on the current budget. The two do not cost the same over time, so it is best to ask for both figures to compare.

You can take it somewhere other than your lender

The lender usually offers its own insurance, but you are not obliged to take it out with them. You have the right to choose another insurer, provided the cover is equivalent. For the same share and the same capital, the price can vary considerably from one insurer to another, especially depending on your age.

It is worth comparing, all the more because the insurance is arranged alongside the loan, not afterwards. We compare the outstanding balance insurance of our partner companies rather than letting you take the lender's by default. Before deciding, look at the terms, the exclusions and any medical formalities, not only the premium.

A protection to look at as a whole

Outstanding balance insurance is one of the two insurances that most often go with a mortgage, the other being fire insurance on the property. Both are judged on real cover as much as on price.

A word on health: the insurer may ask for a medical questionnaire, even an examination, especially for a high capital or an older borrower. Answer accurately, because an inaccurate statement can put the cover in question just when your family would need it. Also watch the length of the cover, which must follow that of the loan, and tell your insurer if the loan is renegotiated or repaid early.

For a priced proposal based on your age, your share and your loan, run a simulation on our website or book an appointment at the Passage Charles Rogier in Brussels, or by video call. We compare several companies and explain every line of the contract.