As soon as you take out a mortgage in Luxembourg, you are bound to hear about the ASRD, the outstanding balance insurance.
What is its role? Is it compulsory? Should you take out this insurance in your particular case?
We explain the role of outstanding balance insurance and its impact on your mortgage in Luxembourg.
Outstanding balance insurance (ASRD) is a form of risk insurance that covers a debt. It protects the borrower's descendants or relatives in the event of the borrower's death. So, if a buyer takes out a mortgage in Luxembourg for his or her project and then dies before making the payments, the ASRD will pay out the insured capital to the beneficiary. Depending on the case, the beneficiaries of the outstanding balance insurance are not always the same: some contracts provide for the bank to receive the money, while others give priority to the spouse or children. In any case, this coverage avoids putting relatives in a difficult situation, since without it they could be obliged to continue paying the loan in place of their deceased parent or spouse.
When you take out a home loan in Luxembourg, you are not obliged to take out outstanding balance insurance. However, this precaution is highly recommended, especially when borrowing large sums. Even if an ASRD is not compulsory, the bank may require such insurance, depending on the family situation and the availability of the loan holder's own funds. For information, the premiums paid for the outstanding balance insurance are tax deductible. When the ASRD is paid in a single premium, there is an increase in these limits.
The premium for outstanding balance insurance is calculated according to the amount covered, the age of the insured person and their medical situation. When you sign your mortgage in Luxembourg, you can choose either to make a single premium payment or to make a periodic payment under the ASRD.
Do not hesitate to contact our partner Lux-Assurances for any further questions.