To finance a buy-to-let property, the bank in practice requires borrower insurance, just as for a primary residence. The cover required is often lighter: death and total and irreversible loss of independence are frequently enough, depending on the bank and its standardised information sheet (FSI, the Fiche standardisée d'information). For an investor, insurance weighs directly on cash flow.
Does the bank require insurance for a buy-to-let investment?
No law makes borrower insurance compulsory, but in practice the bank requires it for any mortgage, buy-to-let included. Depending on the file, it may accept other guarantees in addition or instead: a pledge of a life insurance policy, a personal guarantee, a mortgage charge. For buy-to-let, many banks limit themselves to death (DC) and total and irreversible loss of independence (PTIA), without requiring temporary total incapacity for work (ITT) or permanent total disability (IPT). Only your bank's FSI is authoritative.
You remain free to choose an insurer other than the bank's, provided the policy offers a level of cover equivalent to the FSI criteria. The mechanism is explained in our guide to insurance delegation.
Which cover should you keep for a rental property?
The DC/PTIA core is always there. The real question concerns ITT and IPT when the bank does not require them. The argument that "the rent repays the loan" only fully holds for a property that pays for itself.
- Monthly shortfall: if the rent covers only part of the instalment, the balance comes from your earned income, precisely the income that a long period off work reduces.
- Vacancy and unpaid rent: an empty property or a defaulting tenant leaves the whole instalment for you to pay.
- Combined loans: the rental instalment comes on top of your primary residence instalment; a period off work affects everything.
- Status: a self-employed person without solid income protection is more exposed than an employee well covered by their employer; a lump-sum policy (which pays the scheduled instalment) protects them better than an indemnity-based policy (which only makes up the loss of income actually recorded).
Keeping ITT/IPT makes the insurance more expensive; dropping it leaves that risk with you. The choice depends on your emergency savings, the share of the repayment covered by the rent and the waiting period, often 90 days.
How much insurance weighs on returns
For illustration, take a 38-year-old non-smoking investor borrowing €200,000 over 20 years (240 months) and insured at 100%. With a group contract at 0.30% of the initial capital, insurance costs €50 a month, i.e. €12,000 over the life of the loan. With a delegated policy at 0.12% of the initial capital, it costs €20 a month, i.e. €4,800. The gap reaches €30 a month, €360 a year and €7,200 over 20 years.
The effect on cash flow is immediate: a property that would generate €80 a month before insurance generates only €30 with the group contract, against €60 with the delegated policy. These rates are indicative: the actual price depends on age, health, occupation, smoking and the cover selected. Always compare on the TAEA (annual effective insurance rate) and on the total cost shown in the loan offer.
On the tax side, borrower insurance premiums on a property let unfurnished are in principle deductible from rental income under the actual-expenses regime (régime réel), a point to confirm with your chartered accountant.
Several loans: the €200,000 threshold and the health questionnaire
Since 1 June 2022, the insurer may not ask a health questionnaire if the insured share does not exceed €200,000 per person and the loan is repaid before your 60th birthday. The €200,000 ceiling is assessed across all insured mortgages combined, current loans and the new loan added together. If you are already insured for €150,000 on your primary residence and you borrow €100,000 for a rental property, the total reaches €250,000: the insurer may ask you to complete a questionnaire.
Loans to an SCI: who is insured and how to split the insured share?
When the loan is taken out by an SCI (société civile immobilière, a French property-holding company), the company borrows, but it is the partners, as individuals, who are insured. The quotité (the share of the capital covered by each insured person) is split between them: at least 100% in total, for example 50% / 50% for two partners, or more if the bank requires it. As the cost is proportional to the quotité, two partners each insured at 50% pay, at identical rates, the same as a single person insured at 100%. See our article on the borrower insurance quotité.
On the Lemoine law (the law of 28 February 2022 allowing borrowers to change insurance at any time), caution is called for. Whether the rules of the French Consumer Code, and therefore the Lemoine law, apply to a loan granted to an SCI depends on the nature of the loan and on the offer. Delegation remains possible at signing; substitution during the loan must be checked in the offer and with the bank. A buy-to-let loan taken out in your own name, by contrast, is a mortgage to an individual: the insurance can then be changed at any time, free of charge.
Chaining investments without losing track of your insurance
- One insurance per loan: each new loan, like a loan buyout or a renegotiation, requires a new membership; delegation must be redone.
- Accumulated capital: after two or three transactions, the €200,000 threshold is quickly exceeded, and medical formalities grow heavier with the capital and with age.
- End of the loan: lengthening the term to improve cash flow can push the last instalment past age 60, which also makes a questionnaire possible.
Non-resident investors
A borrower living abroad can insure a French loan, but not every insurer accepts every country of residence and formalities may differ; cover outside France is one of the criteria the FSI may include. See also our article on mortgages for non-residents.
What the firm does
We analyse your bank's FSI and your current policies, we put several insurers in competition with at least equivalent cover, in your own name as well as through an SCI, then we handle the formalities with the bank. The review is free and without obligation.
- The bank requires insurance in practice, often limited to DC/PTIA for buy-to-let: the FSI is authoritative.
- Rent does not always replace a salary: decide on ITT/IPT in light of the shortfall you fund each month.
- On €200,000 over 20 years, moving from 0.30% to 0.12% represents €30 a month and €7,200 in total.
- The €200,000 threshold without a questionnaire is assessed across all mortgages combined.
- In an SCI, the partners are insured; substitution during the loan must be checked in the offer and with the bank.