What is the importance of the outstanding balance insurance for your home loan?

Rudolphe ABENRudolphe ABEN - NEXTIMMO.LU

Rudolphe ABEN

What is the importance of the outstanding balance insurance for your home loan?

Every time a Luxembourg resident applies for a home loan or a personal loan to pay for renovation work, he or she is informed of the ASRD, the outstanding balance insurance. How does it work? Will you be obliged to do so? Would you recommend it in your situation?

In the event of the insured's death, financial security is provided for his or her family

If the borrower dies with an amount still owed on the loan, the family and loved ones will be protected by the outstanding balance insurance. Thus, the ASRD transfers the covered capital to the beneficiary when a buyer receives a home loan in Luxembourg for his project but dies before having made all the required repayments.

Some outstanding balance insurances designate the bank as beneficiary, while others favor the spouse and/or children of the policyholder. In any case, this insurance ensures that the surviving family members will not be left in a difficult financial situation if they have to continue to repay the loan in the event of the borrower's death.

Is outstanding balance insurance mandatory or recommended?

The subscription of an outstanding balance insurance is optional when obtaining a real estate loan in Luxembourg. This security measure is not mandatory, but it is strongly recommended, especially in the case of a large loan.

The bank can insist on an ASRD even if it is not required by law, depending on the debtor's personal finances and the needs of his family.

It may be difficult for your relatives to settle the home loan in Luxembourg if you die while you still owe money on the property. If you have outstanding balance insurance, not only will your family be relieved of the financial burden of paying off the mortgage, but they will also be able to keep the property as part of the family inheritance.

Choosing Outstanding Balance Insurance

The premium for outstanding balance insurance is determined by the amount insured, the age of the insured and his/her health.

It is possible to pay the premium in one go or on a recurring basis within the framework of the ASRD, both of which are offered to you at the time of signing your mortgage in Luxembourg.