Outstanding balance insurance: what is it?

When buying a property, you will hear about outstanding balance insurance. However, not everyone knows what it is. We explain it to you.

What is outstanding balance insurance (ASRD)?

ASRD is an insurance policy taken out at the same time as the mortgage loan.. This insurance provides a form of protection for both your family and your bank should you die prematurely. It will repay the outstanding loan amount to the bank, preventing it from becoming a burden for your heirs. The repayment may be partial or full, depending on the option you chose when taking out the insurance (which will, of course, affect its price).

What are the different options available?

Outstanding balance insurance is available in three forms:

• 50% + 50% cover: This cover applies to you and your partner. Under this model, each of you must repay half of the amount borrowed. If either of you dies, the insurance covers the deceased person’s outstanding share. However, the other person must continue paying their share, with no contribution from the insurer.
  
  
• 100% + 100% cover: Under this model, if either of you dies, the bank covers the entire outstanding amount.
  
  
• Tailored cover: Under this arrangement, you and your partner determine the amount each of you wishes to cover based on certain criteria, such as your respective incomes (e.g. 40% for one person and 60% for the other).

Is it compulsory?

Outstanding balance insurance is not compulsory, but many banks require it. It therefore becomes a form of prerequisite for obtaining a bank loan. On a more personal level, it also provides genuine protection for your loved ones and may be tax-deductible under certain conditions.

All that remains is to choose the option that suits you best.