Nowadays most of the people buy houses by taking home loan. If the borrower dies after a few years of taking the loan, the family has to repay the outstanding loan. If the family is not capable, it may have to lose the property. In such a situation, home loan insurance helps the family by becoming a ‘troubleshooter’. Know why this should be taken.
Understand what is home loan insurance
Home loan insurance is a protection plan for the home loan taken by you. When you go for a home loan, every bank offers you home loan insurance. This should not be taken lightly. If the borrower dies due to any reason after taking a home loan, his outstanding amount is compensated under the home loan insurance plan.
Benefits of home loan insurance
If the borrower has taken home loan insurance and he dies due to any accident, then the family is not under pressure to repay the loan. There is no worry of loan default because this responsibility goes to the insurance company. In such a situation the house remains safe. The bank giving home loan cannot assert its rights over that house.
Not mandatory, but necessary
It is not that it is mandatory for a home loan borrower to get home loan insurance done. Be it the Reserve Bank of India or the insurance regulator IRDAI, there is no such guideline from anyone’s side. 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 loan taker.
EMI option
Insurance premium is 2 to 3 percent 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 EMI 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.
When do you not get the benefit of insurance?
If the home loan is transferred to someone else’s name or closed prematurely, the insurance cover ends. But if you transfer the loan to another bank, make pre-payment or restructure it, there is no impact on home loan insurance. Apart from this, cases of natural death or suicide also do not come under the purview of Home Loan Protection Plan.
