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Loan-linked insurances

When borrowing such a large sum it is advisable to take some precautions so that you or your loved ones do not have to deal with a catastrophic situation. The lending institutions themselves usually require you to take them.

Insurance to cover the balance outstanding

If you were to die during the repayment period of your mortgage the insurance would repay a percentage of the outstanding balance that had been agreed beforehand. This would spare your nearest and dearest a heavy financial burden.

  • The sum assured is the balance of the loan. It therefore decreases and only lasts for the duration of the loan.
  • There is a tax advantage: the premium that you pay for outstanding balance insurance can under certain conditions qualify you for a tax reduction.
  • If your loan is amended during the contract (repaid in advance, interest rate revised etc.) the outstanding balance insurance is adapted accordingly. This way you are never over- or under-insured and you always pay the correct premium.

Endowment policy

An endowment insurance pays out upon attaining a particular age or in the event of death. Every month you pay interest and the life assurance premium, but you yourself decide when and by how much you pay off your capital. If you die or retire, the insurance policy pays off your debt with the bank.

Advantages:

  • If you have to pay both the rent on a new residence and the rent on your previous property for a few months.
  • In the event of sickness or termination of employment.
  • If the interest on your savings is higher than the interest on the loan that you need to pay.
  • You yourself choose when you repay the loan in full and you do not have to pay a prepayment indemnity to the insurance company.

Disadvantages:

  • The capital repayments are not tax deductible.
  • If you never pay off the capital before your retirement or death, then you pay too much interest and the loan is an expensive thing.

Insurance against loss of income

Guaranteed Housing Insurance gets off to a new start from 1 April 2009. This insurance had been abolished in August 2008, when the contract between the Flemish government and Ethias ended with no new insurer being found.

This insurance covers people who are no longer able to repay their mortgage loan owing to involuntary unemployment or work disability.

  1. Duration of involvement: 2 x 18 months
  2. Intensive collaboration between the VDAB and the “Agentschap Wonen” Agency to limit the length of unemployment as far as possible. After two months of unemployment at most, the person concerned is actively assisted.
  3. Involvement can be suspended the moment the insured is no longer involuntarily unemployed or is insufficiently prepared to look for work.

If you have taken out a mortgage loan after 1 August 2008, you will also be able to take out this insurance under the same conditions.

If you lose your job between now and 1 April 2009, you will be able to benefit from a transitional regime where the public authorities will themselves act as guarantors in the event of loss of income.