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With the new rise in unemployment in France, concern is in order among employees. Can job loss insurance be interesting? What exactly is it used for? Are there any conditions to subscribe?
What is it for ?
Loss of employment insurance, also called “unemployment guarantee”, is an optional insurance which guarantees the payment of the monthly payments of a mortgage during a period of unemployment. The terms and conditions for covering the monthly payments are provided for by the insurance contracts and vary according to the credit institutions. Only involuntary loss of employment is covered by the insurance, ie dismissal. The insured must also have a replacement income which corresponds to unemployment benefits.
Who is she talking to ?
This insurance only concerns certain employee profiles and certain periods of inactivity. It is mainly reserved for holders of a permanent contract (CDI). Employees on fixed-term contracts are often excluded. In addition, the majority of insurance contracts exclude employees during a trial period, on notice of dismissal or who have resigned from the guarantee. It only concerns dismissals, whatever the nature of the dismissal, whether for economic reasons, serious misconduct or other. On the other hand, contractual termination is not taken into account. The employee is also asked to prove a certain seniority in the company, generally between 6 months and 1 year. In addition, age limits are imposed in the majority of contracts. They vary between 55 and 65 years old.
How long is the warranty?
Job loss insurance is for a period of between 1 and 4 years. It is tacitly renewed at the end of the term. It is therefore necessary to pay attention to the date of the renewal. It is also necessary to look at the waiting period: it corresponds to a period which runs over several months from the signing of the contract, during which the insured, even if he finds himself unemployed, will not receive any compensation. This period varies between 6 to 12 months. In general, there is a deductible period which is 3 to 9 months depending on the contract and during which the insurer does not cover the monthly payments. These clauses must therefore be well studied by the borrower.
Are we well compensated?
Job loss insurance can be unprotective and yet expensive, so there are some important points to check. The most common system proposes to reimburse the monthly payments of the borrower during the period of unemployment. It is necessary to look carefully if the support is total or partial. In addition, the cost of job loss insurance is calculated either on the amount of the capital borrowed (from 0.3 to 0.7% of the capital borrowed), or on the amount of the monthly repayments of the mortgage loan to be repaid. (from 1 to 7% of the monthly payments). The percentages vary a lot from one credit organization to another and you have to be attentive to the most advantageous percentage.
DAMY Law Firm, Nice, Loss of employment insurance, Update 2022.