Warning for Homebuyers! Avoid this MASSIVE mistake while applying for a home loan
For homebuyers, there are a lot of things to worry about, not least, arranging the hefty money required. However, there is one mistake that they must avoid.
Home Loan Insurance: The amount of home loan availed of to buy a house generally constitutes a significant portion of the monthly income of the household. If something happens to the bread-winner, it becomes almost impossible for the family to run the household, leave aside being able to pay back the home loan in such a situation. It is almost impossible to pay off a huge home loan amount from one’s savings, especially during the initial years of the tenure. However, in the worst case, if the home loan applicant dies then his or her legal heirs are forced to inherit both home and the outstanding home loan amount. To avoid this scenario, one can buy a home loan insurance policy to cover one's home loan liability.
Speaking on why one should buy insurance to cover the home loan liability, Balwant Jain, a Mumbai-based tax and investment expert said, "As a basic principle of financial planning, experts advise their clients to buy life insurance, to cover all their financial liabilities. When you take a home loan, a new financial liability comes into existence. Taking a life insurance policy to cover the home loan liability, will ensure that the legal heirs inherit the house and not the home loan liability. In the eventuality of death, the insurance company pays the lender the outstanding loan amount." Jain said that it helps the dependent family members to avoid the pain of losing the house. This life insurance policy should be over and above the regular life insurance cover that you may have already bought, to cover your other financial obligations, to protect your family members in case anything happens to you.
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On whether a homebuyer should buy this insurance from the same lender who has given home loan, Jain said, "Neither the banking regulations nor any other law, mandate that the home loan borrower has to buy a life insurance policy to cover the home loan. However, in order to avoid the hassle of taking possession of the property and having to auction it, to recover the outstanding home loan amount, lenders generally insist that the borrower buy a term plan to cover the home loan. Moreover, as most of the banks that provide home loans either have their life insurance associates or have arrangements with some life insurance companies to sell their product to enhance their income, these lenders also insist that the life insurance policy be bought through them, which is not mandatory for you."
Now that you know, be sure not to leave your family in danger zone - get the home loan insurance so that you can rest easy.