While the definition of death obviously does not allow any ambiguity in its definition or interpretation, the same is not true of disability insurance. There are indeed different types of guarantees and it is essential to analyze in advance the different forms that may be included in a contract.
The different forms of disability
The fact that the term appears on your contract does not mean that you are fully insured for this warranty. We invite you to carefully read the following chapter and carefully analyze the terms and conditions of your contract.
Reminder of different rates of social security
Social security classifies invalids into three categories
|Categories||Case of the insured|
|1st||The insured can exercise an activity|
|2nd||The insured can not exercise any activity|
|3rd||The insured can not exercise any activity and must also have recourse to a third person to satisfy the different acts of ordinary life|
The total and irreversible loss of autonomy is the most severe form of disability and corresponds to the third category of social security (we speak of a rate of 66%). This guarantee often works in tandem with the death benefit. For the PTIA warranty to work , two conditions must be met
- That the insured can no longer perform any activity that gives the right to remuneration .
- That he can not exercise the acts of the everyday life (to feed himself, to wash himself, to dress himself …)
The two death and disability guarantees lead the insurer to pay a capital to the designated beneficiary . This can be either a person designated directly by the insured, or the bank if it is a loan insurance.
Total permanent disability corresponds to the second category of social security (33% rate). In this case, the insured can no longer carry out any activity giving entitlement to remuneration.
All contracts do not provide for permanent partial disability. This guarantee operates as for the previous one at a rate of 33%, but unlike the IPT, it allows to insure it to partially exercise a professional activity.
In both cases (IPT and IPP), the insurer pays an annuity either directly to the beneficiary, who may be either the person designated by the insured or the bank under a loan insurance contract.
The insurance quota
Under a contract taken out by two co-borrowers, the percentage is an element that measures the amount of the collateral, the bank requiring the total coverage to be 100% of the borrowed capital .
However, as part of a borrower insurance this charge can be divided between the two insureds. For example, up to 50% each. However, it is advisable before defining the quota , to analyze the professional situation of each of the borrowers.
For example, when one of the two co-borrowers contributes two-thirds of the household income and the other one-third, it is advisable to keep this proportion in the distribution of the quota. The most judicious choice will then be a coverage of 70% for the first and 30% for the second.
Of course, there is nothing to prevent insurance beyond the minimum required by the bank. However, it should be noted that if the guarantee were to come into play, the insurer would limit the payment to the quota chosen by the insured. Thus, if you are guaranteed for 50% each, the guarantee will cover up to half of the capital (in the case of the death of the total and irreversible loss of autonomy) or monthly payments (in the case of disability) .
Taxation of the death benefit
The taxation of this type of contract falls within the framework of so-called ” temporary ” death insurance. The payment of the death benefit is totally exempt from taxes and inheritance tax as soon as it is paid to a designated beneficiary.
When the beneficiary is a bank (case of borrower insurance), the capital is paid to the organization to settle the loan. The property is therefore free of all debt and enters into its entirety in the base of succession.
The methods of calculating the rate in the framework of the loan insurance
If you buy death and disability insurance under a loan agreement, there are two formulas for calculating contributions.
In general, bank contracts base the calculation of the contribution on the amount of capital borrowed, whereas most contracts in external insurance delegation establish the calculation of the contribution on the outstanding capital .
Calculation on borrowed capital
This is the calculation principle used by most bank contracts. The principle is simple. The pro-rated rate (if the loan is paid monthly) is applied each month to the principal borrowed initially.
Contribution on the outstanding capital
This calculation method is more complex than the previous one. The principle is based on the combination of two variables:
- Application of a rate that depends on the age of the insured (change in principle every five years). This element is therefore likely to evolve as the years pass and plays against the insured.
- Calculation of the contribution base based on the outstanding capital shown in the amortization table. This annual degression often results in significant savings on total cost.
Death insurance without medical questionnaire
There are many contracts without a medical questionnaire. Be careful, these contracts only work in the case of an accidental death.