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What you need to Know about Home Loan Insurance
What does home loan insurance mean?
A home loan is an investment that will last a lifetime. Home loans may last up to 30 years. Life is not a guarantee card. Imagine a scenario where the person who pays the EMI monthly or quarterly expires due to unforeseen circumstances. The burden of repaying the loan is then on the family members who are dependent. If the loan isn’t repaid or the installments not paid on time, the collateral may be taken if the installments and loan aren’t paid.
In all of these situations, an asset which is valuable to the family and can be used in times of crisis can be taken away due to non-repayment. In situations such as these, you should prepare in advance to protect yourself and your loved ones. Home loan insurance is important, crucial, and some might even argue that it’s imperative.
How to get Home Loan Insurance
Home loan insurance is usually available when obtaining a home loan. The financial institution where you obtain the loan will offer it to you. It is usually bundled together with your home loan. It is recommended to purchase home loan insurance. However, sometimes, this is sold as part of a home loan. This is not the case. No Insurance regulation mandates loans with insurance. You must therefore do your research and choose the insurance plan that best suits your needs, rather than accepting the first one offered.
How Does This Insurance Work?
The home loan insurance works similarly to term insurance. This insurance covers you until the end of your loan term. The insurance period ends once the outstanding loan is paid. If the person who pays the loan dies during the term of the loan, the family can claim the loan insurance to pay the outstanding amount. The bank will not seize the collateral or house.
Payment for Premium
Most home loan protection plans offer a single-payment option. The buyer can also choose to combine the premium with the loan amount. If the premium on a Rs 50 Lakhs Loan is Rs 2 Lakhs then the buyer can choose to take a Rs 52 Lakhs loan. During the repayment of the outstanding amount via EMIs, the buyer can also include the premium.
Important to lenders too
Financial institutions don’t want their loans to become bad debts. Their goal is to protect all of their loans to prevent them from becoming bad debts. These financial institutions encourage borrowers to purchase home loan insurance. If the borrower dies and has not purchased the home loan insurance, the financial institution will have to seize the asset to liquidate it in order to recover any outstanding loan amounts. If the borrower has this insurance, then the financial institution will also benefit.
Riders, add-on benefits
A number of home loan insurers offer optional riders to their home loans insurance plans in order to increase the benefits. Riders such as critical or terminal illness, accidental deaths, unemployment, and disability are available with home loan protection policies.
While applying for a home loan, it is not mandatory to purchase home loan insurance. This type of insurance is important to protect your assets and finances. You must do your research as an insurance buyer before you choose this option. You may be tempted to buy insurance by financial institutions, but it is important that you choose the right one for you. You do not need to purchase the insurance at the same time as you apply for a loan. You can purchase the insurance at a later date through another financial institution, bank or insurance portal. Home loan insurance provides peace of mind to your family by protecting them from unforeseen events.