Home loans are the most viable option when
it comes to fulfilling the desire of owning a house in India. But ever thought
who would pay the outstanding EMIs in your absence? What if something
unexpected happens to you? After all, you do not want that burden to fall on
your family. Considering a home loan is a long-term deal, it is essential
borrowers keep this in mind and plan your finances accordingly.
This is where lenders offer a unique
product called house loan insurance. However, as per RBI and IRDAI, it is not
necessary to take the insurance while applying for the credit from any
financial institute.
What is home loan insurance?
Also known as housing loan protection
plan, is a scheme in which the insurer settles the outstanding dues of the
borrower owing unforeseen circumstances, that may include the demise of the
borrower.
The term policy is the same as that of the
loan. It gives a sense of relief to the borrowers that even after their demise,
the stress will not fall on the family or vacate the home because of the non-payment
of the credit.
What are the features and benefits of home
loan insurance?
Home loan insurance provides a lump sum amount
benefit which you can use to settle the outstanding dues.
The policy could nullify in case of a balance
transfer, restructuring, or full repayment.
Lump sum amount is given to the beneficiary
of the housing finance.
You are eligible to some tax deductions
under Section 80C and 80D.
A single home loan insurance covers all the
borrowers, even if it is a joint credit.
Some medical illnesses and disability also
get covered under home loan insurance. However, you need to pay a premium for
the same.
There is flexibility to repay the premium
that is single or full premium payment. If not, the insurance amount gets
adjusted in the total amount and paid on an annual basis.
You have the option to convert the premium into
amount which can be added to the home loan EMIs as well.
Some medical illnesses covered under this
insurance plan are a heart attack, cancer, and so on.
Suicide or death under natural circumstance
does not get covered this insurance policy.
The categorisation of premiums:
Insurance premium categorisation depends on
your age, loan amount, and medical history. The insurance also saves the
property from getting confiscated by others. Hence, it becomes essential for
you to take it up to handle critical scenarios.
What is the difference between home loan
insurance and home insurance?
People often get confused between these
terms. They are different and serve varied purposes.
Home insurance protects your house from
the following risks:
Damage to the property owing to theft
The accident caused due to natural
calamities like earthquake, flood, storm, fire, etc.
House loan insurance,
on the other hand, focuses on covering the outstanding loan liability from the
moment you avail it off.
The moment you purchase a house, you need
to get home insurance as well. Meanwhile, home loan insurance is not mandatory.
It depends on the loan applicant.
Types of home loan insurance:
There are three types of housing loan
insurance that borrowers receive –
Level cover plan: The coverage remains the same for the insured throughout the tenure.
Hybrid cover plan: The coverage is full in the first year. It starts decreasing as the
balance amount reduces with tenure.
