Home Loan Insurance: Why is it important? How it can come handy in difficult times
If somebody takes a home loan and dies before repaying it, in such a situation, the burden to repay the home loan will fall on the deceaseds family members shoulders. But if they had purchased a home loan insurance plan at the time of taking the home loan, the remaining amount will be paid through it.
Home Loan Insurance: It is not easy for people belonging to middle class families to buy their own house. It takes a lot of capital to buy a house, which many people save with great difficulty in their life. This is why people like the option of taking home loan from the bank because through this, their needs are also fulfilled, and they easily repay the amount taken as loan in installments. While taking a loan is not difficult, repaying can be a huge burden since the loan is for a long duration.
Just imagine, if the person taking the loan dies due to an accident, who will pay the loan amount?
In such a situation, banks collect the loan amount from the family members and if the family members are unable to repay the loan, they may have to lose the house or property against which, the loan has been taken.
But in this situation, home loan insurance can be helpful for you.
Know how having a home insurance policy can support you in difficult times.
What is home loan insurance?
Home loan insurance is a protection plan for your loan.
When you go to take a home loan, every bank offers you home loan insurance.
If the borrower dies, the remaining installment is deposited through this insurance and your house, or collateral, remains safe.
With this, there is no worry of loan default because this responsibility goes to the insurance company.
In such a situation, the lender cannot assert its rights over that house.
Very important for family safety
Be it the Reserve Bank of India or the insurance regulator IRDAI, there is no guideline mandating the purchase of home loan insurance.
But this is necessary to keep the family safe.
This is the reason why many banks or finance providers have started telling the amount of such insurance to the customers only after adding it to the loan.
However, the decision to take it or not entirely depends on the borrower.
EMI option
The premium for home loan insurance is 2 to 3 per cent of the total loan amount.
If you want, you can deposit the insurance money in lump sum while taking a home loan, or you can also make equated monthly installments (EMIs) of the insurance money.
In such a situation, just as your home loan EMI is deducted, in the same way, the monthly installment of your home loan insurance will also be deducted.
The amount of insurance is nominal.
There is no benefit in these situations
In some special situations, you do not get the benefit of home loan insurance.
If you are taking insurance cover for your loan, then you should know about it like - if you shift the home loan to someone else's name or close it prematurely, the insurance cover gets terminated.
Apart from this, cases of natural death or suicide also do not come under the purview of a home loan protection plan.
But if you transfer the loan to another bank, make pre-payment or restructure it, there is no impact on home loan insurance.
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