Everything You Need To Know About Home Loan Insurance
Although house loans help people realise long-held goals of buying a home, home loan insurance protects against unanticipated events or catastrophes. When accepting a house loan application, banks frequently recommend home loan insurance. But is it necessary, or even advantageous? Here we have simplified the notion of home loan insurance for you.
Is house loan insurance required?
To sell home loans and insurance plans to borrowers, many lenders increasingly package them jointly.
Mehra emphasises that house loan insurance is not required because there is no RBI policy to that effect. It is only to be used at the borrower’s convenience. Unfortunately, the manner it is presented to borrowers sometimes generates the idea that purchasing loan insurance together with the house loan is mandatory. The Insurance Regulatory and Development Authority of India (IRDAI) has also made no such suggestions for required insurance purchasing with house loans. However, analysts claim that one should give coverage for all liabilities as well as supplementary coverage for future payments.
The Benefits of Home Loan Insurance
- In the event of the borrower’s death, home loan insurance makes it simpler for his family to repay the responsibility.
- By paying an extra fee, you can expand your coverage to include diseases, impairments, or job loss.
- Holders of home loan insurance plans can deduct the premiums they pay under Section 80C of the Income Tax Act.
- Home loan insurance protects the asset by providing security.
- Even if the debt is shared, a single policy covers the full loan.
Factors to think about when selecting a home loan insurance policy
Examine a few key aspects before purchasing home loan insurance to guarantee the product meets your requirements. Regardless of whether the bank recommends the insurance provider, specialists encourage the borrower to conduct their own research.
Method of payment
The method of premium payment is an important consideration when purchasing home loan insurance. There are three primary payment options: single premium payment, recurring premium payment, and restricted payment plan. Borrowers should be aware that a single premium payment plan combines the premium amount with the loan value. This raises your Equated Monthly Instalments (EMI) since the lender pays the entire sum on your behalf and adds it to your monthly home loan EMI.
Coverage
It is critical to understand what your home loan insurance policy covers. Most policies may not cover natural death or suicide, but some may cover serious diseases, unanticipated professional difficulties, and impairments for an additional fee.
Deduction for taxes
Whereas the price paid for home loan insurance is tax deductible, scholars pointed out that if you have chosen the single premium payment plan, this will not be accessible to you. You will lose a significant tax benefit because your bank paid the lump payment and you will only be repaying the bank as part of your EMI.
Term insurance vs. mortgage insurance
“Each and every individual planning for a life cover requires to have a sufficient sum assured to cover their family’s living expenses, current liabilities, and provide for prospective fund prerequisites like children’s schooling, and marriage, among others, in particular instance of their untimely death,” says Casparus Kromhout, MD and CEO of Shriram Life Insurance Company. As a result, obtaining a term insurance policy to cover not just liabilities but also spending and future goals becomes vital.
Life insurance with a house loan is term insurance that gives a life cover of the outstanding home loan amount, which lowers yearly. As a result, it solely protects the house loan debt and is only applicable when the loan is repaid or repossessed. The insurance included with the house loan will not protect the family from any other responsibilities or future expenditures.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
