Anyone who has to forego income due to the corona pandemic, but at the same time finances a property, has a problem. The residual debt insurance can help.
- In the event of damage, the residual debt insurance takes over the repayment of the outstanding balance of a loan.
- The residual debt insurance takes effect in the event of death, but also optionally in the event of occupational disability or unemployment.
- Residual debt insurance can only be taken out in combination with a loan.
Probably the biggest nightmare for many property owners: Suddenly not being able to pay the mortgage installments *. In times of the corona pandemic , a lot is uncertain - including the liquidity of some property owners.
According to the current NPL Barometer 2020 of the Bundesvereinigung Kreditankauf und Servicing (BKS), the majority of the participating decision-makers at German banks expect a further increase in non-performing loans in Germany over the next twelve months . This expectation applies to both residential real estate loans and unsecured consumer loans. The residual debt insurance can serve as security for the loan and offer some advantages.
Residual debt insurance, also called residual credit insurance, step in in the event of occupational disability, unemployment or the death of the borrower. Real estate service provider McMakler explains what needs to be considered when taking out residual debt insurance.
Real estate financing in the event of job loss: how does residual debt insurance work?
Covered: If the borrower dies during the term of the loan , the insurance will pay off the outstanding balance . The sum insured decreases in line with the advanced repayment of the real estate loan. “Only the first borrower is covered by the residual debt insurance. Usually this is a household's main breadwinner. In the event of his death, the family does not have to worry about repaying the outstanding loan, ”explains Felix Jahn, CEO and founder of McMakler. In addition to death, occupational disability, involuntary unemployment or income reductions - for example due to short-time working during the Corona crisis - can be insured. Before signing a contract, borrowers should check carefully which eventualities the insurance covers.
The sum insured is paid out over a specified period of time and corresponds to the monthly financing rates . "In the event of unemployment, most residual debt insurance policies last for twelve to 18 months," says Jahn from McMakler and continues: "In addition, borrowers should find out about possible waiting and waiting periods before taking out residual debt insurance. The insurance cover often only takes effect three to six months after taking out the insurance. "
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Corona pandemic: How is residual debt insurance taken out?
The residual debt insurance can only be taken out in combination with a loan - either immediately after the loan agreement or later during the loan period . It is important to note that it is not legally mandatory to take out residual debt insurance. Policyholders should note that the additional coverage can significantly increase the cost of the policy. “Before taking out residual debt insurance, interested parties should obtain several offers and check them carefully. The amount of the APR is particularly decisive , ”says CEO Jahn von McMakler. For the residual debt insurance there are neither fixed percentages nor formulas that the policyholder can use as a guide. It always depends on the individual case.
Financing the house: termination of the residual debt insurance
Policyholders can terminate the residual debt insurance regardless of the current loan agreement. The conditions under which the termination occurs depends on the individual contractual provisions. As a rule, the insurance can be canceled at the end of a payment period.
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Alternative: term life insurance instead of residual debt insurance
Like residual debt insurance, term life insurance takes effect in the event of the insured's death. With term life insurance, the insurer agrees a fixed sum insured with the interested party. Unlike residual debt insurance, interested parties can take out term life insurance independently of the loan agreement . Accordingly, the insurance rate is usually cheaper. However, it should be noted that with term life insurance, the health check is usually very comprehensive and strict.
Conclusion: Financing property in times of corona - when is residual debt insurance worthwhile?
“The fact is that due to the economic downturn , borrowers have slipped into short-time work or even completely into unemployment , so that insurance companies could help in individual cases to continue paying the loan installments. Of course, this assumes that these circumstances are included in the scope of services of the residual debt insurance, ”explains Jahn von McMakler. And further: “Policyholders should take a closer look here. In the event of unemployment, for example, the insurance may only provide benefits for a limited period of time or not at all, for example if a fixed-term employment contract has expired. Certain diseases could also be excluded from the scope of services. Expert advice from an expert is therefore advisable in order to find the right insurance for your personal circumstances. ” * Merkur.de is part of the nationwide Ippen-Digital editors network.
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