Waiting Period in Borrower's Insurance: A Complete Guide for 2024

Are you considering a mortgage and wondering about the waiting period in your borrower's insurance? This often-overlooked mechanism can significantly impact your protection in the event of unforeseen circumstances. Learn how it works, what rules apply, and how to avoid unpleasant surprises when taking out your policy.

What is the Waiting Period in Borrower's Insurance?

The waiting period, also known as the qualifying period, is a common clause in borrower's insurance contracts. It refers to a period during which, even though you are paying your premiums, certain coverages do not yet apply. In other words, if a claim occurs during this time, the insurer may refuse to compensate you.

What is the Purpose of This Waiting Period?

Insurers justify this waiting period as a means to protect themselves against fraud or incomplete health declarations. For example, if a borrower takes out insurance while already aware of an illness, the waiting period allows the insurer to avoid covering a risk that was already known.

Waiting Period vs. Excess Period

It is important not to confuse the waiting period with the excess period. The latter refers to the period during which the insured must wait after a claim occurs before receiving compensation. The waiting period, however, concerns the period before which the coverage does not activate at all.

How Does the Waiting Period Work?

Duration of the Waiting Period

The duration of the waiting period varies depending on the contract and the coverages. Generally, it ranges between 1 and 12 months, but some contracts may provide for longer periods for specific risks, such as mental health conditions or back problems.

For example:

• For death coverage, the waiting period is often short or even non-existent.
• For permanent disability or temporary incapacity to work coverage, it may last several months.
• For conditions such as anxiety disorders or herniated discs, some insurers impose a waiting period of 6 to 12 months.

When Does It Begin?

The waiting period generally begins on the effective date of the insurance contract, i.e., the date on which you start paying your premiums. However, some contracts may specify a different starting point, such as the date of the loan agreement or the date the coverages are activated.

Which Coverages Are Affected?

Not all coverages in a borrower's insurance contract are systematically subject to a waiting period. Here are the main coverages affected:

• Permanent Total Disability (PTD): often subject to a waiting period of 6 to 12 months.
• Temporary Incapacity to Work (TIW): may include a waiting period of 3 to 6 months.
• Job Loss: some contracts provide for a waiting period of 6 to 12 months.
• Death: rarely subject to a waiting period, except in cases of suicide (where a 12-month waiting period is often applied).

Can You Avoid or Reduce the Waiting Period?

Negotiating with Your Insurer

The waiting period is not a legal requirement; it is a contractual clause. This means it is possible to negotiate it with your insurer, especially if you present a low-risk profile (good health, stable profession, etc.). Some insurers offer contracts without a waiting period, but these are often more expensive.

Switching Borrower's Insurance

Since the Lemoine Law of 2022, you have the option to switch borrower's insurance at any time, without fees or penalties. This measure aims to encourage competition and allow borrowers to find more advantageous contracts. If your current contract includes an excessively long waiting period, you can therefore look for another with more favourable terms.

Legal Exceptions

In certain cases, the law imposes limits on waiting periods:

• For mortgage loans: if you take out borrower's insurance as part of a mortgage, the insurer cannot impose a waiting period exceeding 12 months for disability or incapacity coverages.
• For healthy borrowers: some contracts provide for reduced or even non-existent waiting periods for low-risk profiles.
• In the event of insurance substitution: if you switch borrower's insurance during the loan, the new insurer cannot impose a new waiting period for coverages already covered by the previous contract.

What Are the Risks of Not Respecting the Waiting Period?

If a claim occurs during the waiting period, the insurer may refuse to compensate you. This means you will have to bear the repayment of your loan alone, which can represent a significant financial risk, particularly in cases of disability or job loss.

Concrete Example

Imagine you take out a mortgage with borrower's insurance that includes temporary incapacity to work coverage subject to a 6-month waiting period. If you are involved in an accident 3 months after taking out the policy and are unable to work for several weeks, the insurer may refuse to cover your loan repayments during this period. You will therefore have to pay them out of your own pocket.

What to Do in Case of a Dispute?

If you believe the insurer has applied the waiting period abusively, you can:

1. Contact the insurer's complaints service: explain your situation in writing and request a review of the decision.
2. Refer the matter to the insurance mediator: if your complaint is unsuccessful, you can appeal to the mediator, an independent third party responsible for finding an amicable solution.
3. Take legal action: as a last resort, you can take the matter to court to assert your rights. However, this process can be lengthy and costly.

How to Choose the Right Borrower's Insurance?

Comparing Offers

To avoid unpleasant surprises, it is essential to compare several borrower's insurance offers before taking out a policy. Here are the criteria to consider:

• The duration of the waiting period: prioritise contracts with short or non-existent waiting periods.
• The cost of premiums: a contract without a waiting period may be more expensive, but it offers better protection.
• Exclusions of coverage: check which situations are not covered by the contract.
• Termination conditions: since the Lemoine Law, you can switch insurance at any time, but some contracts impose fees or notice periods.

Using a Broker

Engaging a borrower's insurance broker can help you find the most suitable contract for your situation. The broker is familiar with market offerings and can negotiate more advantageous terms on your behalf, including regarding the waiting period.

Carefully Reading the General Terms and Conditions

Before signing a contract, take the time to carefully read the general terms and conditions, particularly the clauses relating to the waiting period. If any point seems unclear or unfair, do not hesitate to ask your insurer for clarification.

Frequently Asked Questions

What is the Difference Between the Waiting Period and the Excess Period?

The waiting period is a period during which coverages do not apply at all, even if you are paying your premiums. The excess period, on the other hand, is a period after a claim occurs during which the insurer does not pay compensation, but the coverage is active.

Can the Waiting Period Be Removed from a Borrower's Insurance Contract?

Yes, it is possible to negotiate the removal or reduction of the waiting period with your insurer, especially if you present a low-risk profile. Some contracts even offer coverages without a waiting period, but these are often more expensive.

What Happens If I Switch Borrower's Insurance During the Loan?

If you switch borrower's insurance, the new insurer cannot impose a new waiting period for coverages already included in your previous contract. However, for any new coverages taken out, a waiting period may apply.

Does the Waiting Period Apply to All Coverages?

No, not all coverages are subject to a waiting period. For example, death coverage is rarely affected, except in cases of suicide (where a 12-month waiting period is often applied). Disability and incapacity to work coverages, however, frequently include a waiting period.

How Can I Tell If My Contract Includes a Waiting Period?

To find out the waiting periods applicable to your contract, consult the general terms and conditions or the coverage table provided by your insurer. This information must be clearly stated. If in doubt, do not hesitate to contact your insurer for clarification.