Posted on 01 March 2022

What type of mortgage insurance should I choose? Single or annual premium?

The mortgage insurance guarantees the repayment of a real estate loan. This insurance covers the risks of death, disability and allows the subscriber not to leave debts to his co-borrower and/or his family. 
If this type of insurance is often required by banks to take out a real estate loan, it can also represent a tax advantage.
Indeed, you can deduct these insurance premiums in your tax return and make real savings.
How to deduct insurance premiums? What type of premium is most favorable?

When taking out an outstanding balance insurance, you can choose between monthly or annual premium payments, or an one-off payment (single premium). Which type of premium should I choose in order to take full advantage of all the tax benefits?

The annual or monthly premium

If you choose to pay your premium annually or monthly, you can deduct the premiums as special expenses. The deduction limit is 672 euros per year and per person in the household. This limit applies to all insurance and interest expenses.
Therefore, if you have other insurances to deduct (e.g. health or car insurance) or interest on a personal loan, the 672 euro limit can be quickly reached.

The single premium

The single premium allows you to pay your mortgage insurance in one single payment.
This premium payment method allows you to increase the deduction limit for special expenses. The limit is increased as follows:
  • 6 000 euros plus 1 200 euros for each child in the taxpayer's household
  • 8% for each year beyond 30 years old
A family of 4:
·      The mother, aged 38, 
·      The father, 40 years old 
·      Two children
Together they can deduct up to 24 960 €.
Explanations :
Majoration for the 40 year old father:
6 000€ + 2 x 1 200 € = 8 400 €
8 % x 10 x 8 400 € = 6 720 €.
Majoration for the 38 year old mother::
6 000 €
8% x 8 x 6 000€ = 3 840 €
Total : 24960€
Good to know: A single premium mortgage insurance is deductible every 5 years on your Luxembourg tax return. This allows you to cover part of a mortgage today and another part in 5 years, while taking full advantage of the tax benefits.
Don't want to calculate the deductible limit for your situation yourself? Use to fill in your tax return and the system will take care of all the necessary calculations. A real time and money saver!


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