If you take out a mortgage in Luxembourg or even a personal loan to finance works in your home, you will inevitably hear about the ASRD, the Remaining Due Balance insurance (or “assurance solde restant dû” in French). What is its purpose? Is it compulsory? In your specific case, do you need it?
ASRD Protects Your Relatives in the Event of Death
The Remaining Due Balance insurance protects the borrower’s descendants or relatives in the event of the borrower’s death. Thus, in case a purchaser obtains a mortgage loan in Luxembourg for his project and deceases before completing his repayments, the ASRD pays the insured capital to the beneficiary.
“You are not obliged to take out a Remaining Due Balance insurance. However, this provision is strongly recommended.”
Depending on the case, the beneficiaries of the Remaining Due Balance insurance are not always the same: some contracts stipulate that the bank should receive the money, others specify that a payment should be made to the spouse or children. In all cases, this insurance avoids putting relatives in difficulty, as in case the deceased has not subscribed one, they may be obliged to continue paying the loan in lieu of their lost parent or spouse.
Taking Out a Remaining Due Balance Insurance: Compulsory or Advisable?
When you take out a mortgage loan in Luxembourg, you are not obliged to take out a Remaining Due Balance insurance. However, this provision is strongly recommended, especially when borrowing large amounts of money.
Even if the ASRD is not mandatory, the bank may require such insurance, depending on the family situation and the equity position of the borrower.
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In case you decease, those close to you could be in difficulty if they had to pay out your loan, and the simple sale of the property may not be enough to repay the entire mortgage in Luxembourg… Thus, subscribing a Remaining Due Balance insurance, not only your relatives will not have to continue repaying the loan, but they will be able to choose to keep the property as part of the family estate.
For information, the premiums paid for the Remaining Due Balance insurance are tax deductible, provided they do not exceed 672,00 EUR per year or 1 344,00 EUR for a couple (and 672,00 EUR more for each additional dependent child). If the ASRD is paid as a single premium, these ceilings are higher (e.g. a single person, without children, under the age of thirty can deduct a single premium of 6 000,00 EUR).
Several Possible Options for Your Outstanding Balance Insurance
The Remaining Due Balance insurance premium is calculated according to the amount covered, the age of the insured and his/her medical condition.
When you sign your mortgage in Luxembourg, you can choose either to make a single premium payment or a periodic payment to subscribe your ASRD.
“You can choose to make a single premium payment to subscribe your ASRD.”
LA LUXEMBOURGEOISE
Société Anonyme d’Assurances
9, rue Jean Fischbach
L-3372 Leudelange
www.lalux.lu
