Home Loan Insurance : Safeguard Your Family and Property
Mini Balakrishnan
A mortgage loan is a long-term financial commitment lasting between 20 and 25 years. You are taking on a huge debt and promising to pay it back over a lengthy period. Can you see yourself unable to make your monthly EMI payments because of anything beyond your control? In such a case, other family members may be responsible for making the EMI payments. Your house and all of your possessions are at risk if you go into default.
That’s why life insurance on a mortgage is so important; it covers expenses in the event of the borrower’s death, protecting the family from financial ruin. It also helps you relax by reassuring you that you’re ready for any monetary emergencies.
What Is Home Loan Insurance?
Home loan insurance in India is a policy that covers the outstanding loan amount in case of the borrower’s death, disability, or critical illness. It ensures the repayment of the home loan, protecting both the borrower’s family and the lender from financial burdens.
Home Insurance vs. Home Loan Insurance
Theft, fire, and other disasters may all cause significant damage to your house, but luckily you can protect yourself financially by purchasing home insurance. It will pay for the home’s repair or replacement as well.
In contrast, home loan insurance is a policy that pays off the debt in case of the borrower’s death or another covered event. In this scenario, the housing loan insurance coverage will repay the lender in full.
Homeowners insurance is available whether or not you have a mortgage. However, house loan insurance is only available with a mortgage loan. Although mortgage insurance may let you put less money into a property, homeowner’s insurance costs less each month.
How Can You Get Home Loan Insurance?
Mortgage insurance is often taken out in conjunction with a mortgage. In most cases, the financial institution from whom you borrow money to finance your house purchase will also provide you with mortgage insurance.
Financial firms might make mortgage insurance appear obligatory even when it is in the customer’s best interest to have it. Not all cases are like this. There is no mandate for insurance coverage under current law. Do your homework and choose an insurance policy that meets your needs rather than settling for the one someone else suggests.
Equivalent to term life insurance is home loan insurance. Your protection lasts until the loan term ends. Insurance coverage ends after the debt is paid in full. Loan insurance may be used to cover a mortgage’s outstanding balance if the borrower cannot do so due to unforeseen circumstances. In the unfortunate event that you are unable to repay the money you have borrowed, your home will be safe.
Make sure the protection plan you choose is good for the duration of your home loan repayments. Consider a few of the bank’s premium plans and home loan insurance calculators and choose the one that best suits you. Keep track of your home loan EMI even if you’re paying premiums with them.
There are two kinds of home loan insurance.
- Term Insurance: A term policy’s blanket coverage protects liability and debt. The insurance proceeds are sent directly to the nominee, who may use them to settle the mortgage and any other outstanding debts.
- Home Loan Insurance: If anything happens that prevents you from paying back your mortgage, this insurance policy will kick in and pay off the balance. In the event that the insurance must be repaid by the borrower or nominee named, the insurer makes payment straight to the lender and settles the amount.
| S.No. | Term Insurance | Home Loan Insurance |
| 1. | The premium may be paid on a monthly, quarterly, or annual basis at your discretion. | The premium is paid all at once. You may ask your lender to include the premium payment in your monthly EMI by adding the premium amount to your loan. |
| 2. | Offers coverage for a limited period. | Only protects the borrower against the cost of the loan itself. |
| 3. | In the event of an unfortunate incident, the nominee(s) receive(s) an upfront payment. (the amount could be utilized to settle the home loan and reimburse any unsettled liabilities). | In the event of the borrower’s loss of life, family members may use the insurance to pay off the outstanding house loan balance. |
| 4. | Covers all obligations, including particular situations such as sickness, disability, layoffs, and so forth. | Only the optional plan provides coverage for severe sickness, disability, unexpected death, and underemployment. (which comes at a more increased cost). |
Benefits of Home Loan Insurance
Mentioned below are some of the most prominent benefits of getting home loan insurance.
Tax Advantages
There are multiple housing loan insurance tax benefits. For example, your housing loan insurance policy premium may qualify for a tax deduction under Section 80C of the Income Tax Act.
Pay back the Remaining Home Loan Balance
In the event of the principal borrower’s untimely death, the house loan insurance policy will repay the loan’s outstanding balance. This protects the family against financial hardship in the event of a loss of income. If a borrower dies without being able to pay the EMI, the lender may take possession of the home to do so. However, with house loan insurance, you may safeguard yourself. The insurance company will cover the rest of the debt in such a case.
Add-on Protection Against Catastrophic Sickness or Instability
Home loan insurance often includes extra protections, such as protection in the event of a serious sickness, disability, or loss of income. In such a catastrophe, this may ease your financial load.
One Insurance Coverage Can Cover Several Borrowers
Multiple people may co-sign on a mortgage, and a single insurance policy can cover each borrower. A single insurance policy for a mortgage loan may cover all of these contingencies. You won’t have to go through the trouble and cost of obtaining individual insurance for each borrower.
Option to Pay a Single or Monthly Premium
Home loan insurance is a single premium plan with the option to pay monthly. The premium is a one-time cost in this case. Due to the high insurance cost, many lenders may allow you to roll your payment into your loan.
How Does Loan Impact Insurance Cost
Like the premiums for other types of insurance, loan insurance premiums depend on various criteria. In short, the insurance cost is affected by everything, making a claim more likely to be filed and/or increasing the insurer’s responsibility. Consider the following:
1. Money Borrowed
The bigger the loan amount, the higher the danger of default in the eyes of the insurance. Large EMIs might be difficult to handle during economic downturns and currency crises. Because of this, insurance companies demand exorbitant rates from their clients.
2. Period of Repayment
Although selecting a longer payback period would reduce your EMI, it will also increase your loan insurance premiums. Insurers hike rates to compensate for the growing risk of claims brought on by the unstable employment market and declining health.
3. Age
As people age, they often become less employable. After the age of 50, this is particularly true. However, you are required to leave your work at reaching the age of 60. It may become hard to manage your debt at some point, even if you earn a pension. Therefore, the premium is somewhat greater for the elderly than for the young.
4. State of health
Your ability to make payments is proportional to your state of health. A person’s earning potential is at risk if they suffer from many ailments, especially if any conditions are chronic or life-threatening. Therefore, a healthy individual will pay a significantly lesser premium than someone with a serious sickness.
Things to Consider Before Taking Home Loan Insurance
Purchasing loan insurance with consideration of all relevant factors is a good idea. To make a wise choice, consider the following considerations carefully.
The Total Cost Of Insurance
Focus on more than just the monthly payment when deciding whether or not to get loan insurance. The monthly premium may seem like little, but when added up over the life of the loan, it may be rather costly.
Wordings of Policies
Read the policy language carefully on the insurer’s website. It specifies in great detail what is and is not included. Insurance on a loan amount with that insurer is a good use of money if you have a condition not covered by the policy. The specifics of each insurer’s policy language may be compared and contrasted.
The Claim Settlement Procedure
Find out whether your insurance company has an online claim form. Take a look at the claim settlement paperwork checklist. Loan insurance is new in India, but you should still consider the claim settlement ratio.
Payment Procedure
Some insurance companies will only accept payment each month, and others will only accept payment annually. Payment of the outstanding principle, interest, and insurance cost may all be included in the EMI under some plans. Before purchasing insurance, you should investigate the payment options available to you.
Conclusion
It is up to you to choose what kind of home loan insurance policy best suits your needs. However, if you are the only provider for your family, the best home loan insurance policy in India may be an option worth exploring.
Home loan insurance may alleviate the stress of coming up with the money to pay off your mortgage in the event of a disaster. If you want to give yourself and your loved ones some peace of mind, it’s always preferable to be ready for the worst-case situation.
