Mortgage protection insurance: what your bank can require, and what it cannot

What mortgage protection insurance covers

It is decreasing term life insurance: the sum insured follows the amount still owed on your loan. If the insured person dies during the loan, the insurer pays the outstanding balance to the bank, up to the amount insured, and your family does not have to repay the covered share.

Total and permanent disability cover can be added at Foyer, LALUX, AXA and Baloise. Read its definition: at AXA, for example, partial or temporary disability and sick leave are not covered.

Compulsory? No, and you choose the insurer

The law does not require mortgage protection insurance: the bank may make it a condition of the loan, and it usually does for a mortgage.

If it does, it cannot force its own policy on you. Article L. 226-11 of the Consumer Code prohibits tying practices and requires the lender to accept a policy from another insurer as long as it offers a level of guarantees equivalent to the one the lender proposes.

In practice, ask the bank for its requirements in writing (sum insured, term, split between co-borrowers, disability cover or not), then compare offers that meet all of them.

One or two insured persons, 50% or 100%

When two people borrow together, the cover can be split between them, for example 50% each, or each borrower can be insured for 100%. At 50% each, the death of one repays half of the balance; at 100% each, it repays the whole loan, for a higher premium.

The premium also depends on the loan amount, rate and term, on the age, health and lifestyle of the insured (smoker or not), and on how you pay.

Single, periodic or mixed premiums

• Single premium: paid once at the start of the contract, with nothing further to pay. It is what unlocks the higher deduction limits.
• Periodic premiums: paid over the life of the contract and deductible each year within the ordinary ceiling.
• Mixed options: AXA’s MyCreditProtection offers five payment methods, including evolving premiums recalculated each year according to age and outstanding capital, level premiums whose payment can run beyond two thirds of the loan term, and combinations of a single premium with either.

Tax deduction: where the single premium wins

Periodic premiums are deductible under article 111 of the income tax law, within the ceiling of €672 a year per household member: you, your spouse or partner taxed jointly, and each child giving entitlement to a child tax reduction. This ceiling is shared with your other insurance premiums and with interest on consumer loans; it fills up quickly if you already pay for other insurance.

A single premium raises that ceiling, in the year of payment, by its own amount, up to €6,000 plus €1,200 per child, if the loan finances your own home: purchase, construction, extension, conversion or renovation. For a purchase or construction, this limit rises by 8% for each year of age above 30 at signature, up to +160% at 50.

Maximum increase per insured person, from the table in tax circular L.I.R. no. 111/1 of 2 November 2017; it comes on top of the ordinary ceiling. A jointly taxed couple where each partner is insured combines two increases, but each child counts for only one of them, and a share one partner does not use cannot pass to the other. If an increase has already been granted for the same home, for example for a new loan or a refinancing, the new one is reduced by those deducted over the previous five years.

Only premiums paid to an insurer authorised in Luxembourg, or authorised and headquartered in another EU member state, are deductible. The other deductions are covered in our tax deductions guide.

Health: questionnaire and the right to be forgotten

A health questionnaire is required at signature, sometimes with medical tests. Fill it in accurately: it forms the basis of the contract and lets the insurer set the premium and any exclusions.

Since 1 January 2020, the “right to be forgotten” convention has made cover easier to obtain for people who have had cancer and, under conditions, hepatitis C or HIV. It applies to loans for a main residence or business premises, up to €1,000,000 of total cover, with the contract ending before the policyholder’s 70th birthday:

• Cured cancer: you do not have to declare it if active treatment ended 10 years ago, or 5 years for a cancer diagnosed before 18, with no relapse.
• Ten cancers and hepatitis C: must be declared, but with no surcharge and no exclusion if the convention’s medical criteria are met.
• HIV: must be declared, with the surcharge capped at 100% if the medical criteria are met.

Foyer Vie, La Luxembourgeoise Vie, AXA Assurances Vie Luxembourg and Bâloise Vie Luxembourg have signed up to the convention, as have Allianz Life Luxembourg, AME Life Lux, Cardif Lux Vie and Raiffeisen Vie.

What Foyer, LALUX, AXA and Baloise offer

Features as listed on the insurers’ websites in September 2026; conditions, exclusions and prices are in the contract documents.

Before you sign

• Do the sum insured and term match the loan, and the split between co-borrowers what the bank requires?
• Is disability covered, and under which definition?
• Have you compared at least one offer from outside the bank, with equivalent guarantees?
• Single premium: what deduction ceiling applies given your age and children, in the year of payment?
• New loan or refinancing: has an increase already been deducted for this home in the last five years?

For savings and pension contracts, see our life insurance comparison.