Home Loan Insurance: Protect Your Home Loan

Having your own house is one of the important financial milestones you achieve after long-term financial planning. A home is the most valuable asset in an individual’s life, which you would want to protect from any mishappening. There is always a sense of fear in the home loan borrower’s mind i.e., if any unexpected incident happens in his life, then who will pay the remaining home loan amount. No borrower would want the stress of home loan would fall on his/her family. Therefore, it is recommended that the borrowers go for Home Loan Insurance.

What is Home Loan Insurance?

Home Loan Insurance is the protection layout for home loan buyers. It helps in the outstanding home loan coverage in case of any mishappening. If an unfortunate incident happens and the borrower fails to pay the loan amount, the insurance company clears the due amount. It covers not only the applicants but also the house and all its contents. In case of any unfortunate incident, the family members would not have to vacate the house. The policy term is the same as home loan tenure.

Importance:

It is beneficial for both the lender and the borrower.
1. Importance for Borrowers: It protects the home as it ensures that if the borrower is not able to able to pay the loan amount on time due to certain unavoidable circumstances, the insurance company will pay the due amount on behalf of the borrower. Thus, there would be no burden on the family during the time of crisis. Since a home loan is a secured loan, the lender can acquire the borrower’s home if the borrower cannot pay the loan on time. But if the borrower has home loan insurance, the house remains with the borrower even if he/she fails to pay the loan amount.
2. Importance for Lenders: Many banks and financial institutions get a lot of benefits through home loan interest rates. If a borrower fails to pay the loan amount on time, it affects the regular source of income of the lenders. The home loan insurance works as a savior and pays the expected amount to the lender on time, thus making their source of income regular.

Types:

1. Level Cover Plan: The insurance coverage remains the same throughout the home loan tenure.
2. Hybrid cover plan: Full coverage in the initial year. As the balance amount reduces, the insurance coverage reduces too.
3. Reducing cover plan: The insurance coverage never remains the same. Reduce as balance amount reduce.

Benefits:

1. It provides coverage security coverage to both the borrower and the lender concerning the big liabilities and incurring losses, respectively.
2. Premium paid towards it is applicable for tax benefits.
3. It offers coverage to home loan outstanding loan amount.
4. It provides you the option to convert insurance premium into the amount to be added in home loan EMI.
5. It also provides coverage to medical ailments such as heart attack, cancer, and many more.

Difference Between Home Insurance and Home Loan Insurance:

Home Insurance: Home insurance, also known as homeowner’s insurance, offers insurance coverage of the house against incidents like fire, explosion, lightning, theft, and burglary, etc.
Home Loan Insurance: It is a protection coverage to pay the outstanding loan amount if the borrower is unable to pay the amount due to certain unavoidable circumstances.

Things to Remember Before Going for Home Loan Insurance Policy

1. It can be purchased either from a general insurance provider or a life insurance company.
2. It would be best if you always compared the different insurance provider’s plans before going for one.
3. If the policy is purchased from a general insurance provider, then it has to be renewed annually, and the premiums charged are generally lower.

You can purchase the policy either by visiting the insurer provider’s office, or you can apply for it online.

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