Home loan insurance, often known as mortgage insurance, is a policy that protects a borrower from unforeseen circumstances. Because obtaining house finance entails a borrower’s long-term repayment responsibility, a home loan insurance policy assures that a borrower is assisted and protected in the event that he is unable to repay his home loan EMIs.
What is home loan insurance?
A house loan insurance coverage ensures that if a borrower is unable to make EMI payments due to unforeseen circumstances, the insurance company will pay the loan. Such circumstances can emerge as a result of the principal borrower’s abrupt death, job loss, or a significant accident. Your home loan insurance policy’s terms and conditions are determined by the type of policy you purchased. In India, a variety of comprehensive house loan insurance policies are available, each with its own set of benefits.
Home loan insurance providers in India
In India, almost every bank has an insurance subsidiary that sells house loan protection products. SBI Life, for example, is offered by the State Bank of India (SBI); ICICI Bank offers ICICI Lombard; and HDFC offers HDFC Life and HDFC Ergo. However, some banks do not have an insurance subsidiary that sells house loans and home loan insurance packages because they do not have a tie-up with life insurance providers or general insurers.
Is it necessary to buy a home loan insurance policy?
You are not required to get home loan insurance, despite the fact that the bank providing you with the loan may make it appear that you must. Banks always encourage borrowers to take up a home loan insurance policy because it ensures that the loan will be paid even if the borrower is unable to pay. In such a circumstance, the insurance provider will assist you.
However, for their own good, home loan borrowers must buy a home loan insurance policy. Financial planners are unanimous in their opinion that home loan borrowers must buy a home loan insurance policy to get cover against any misfortune.
Also see: Home insurance versus home loan insurance.
Home loan insurance premium
The borrower is required to pay a one-time premium to the insurance company in the majority of home loan insurance policies. There are, however, home loan protection plans that allow the borrower to pay the policy premium in instalments. The amount you pay as a home loan insurance policy instalment is determined on the amount of your loan and the type of coverage you choose. Your age and medical history have an impact on the cost of your home loan insurance coverage. Basically, the greater the premium, the older you are, and the lesser the premium, the more physically fit you are.
Home loan insurance coverage period
A home loan insurance coverage remains in effect for the duration of the loan. The insurance coverage expires after the loan is paid in full. After the borrower’s death, the house loan insurance policy will expire. The same is true if the home loan is transferred to a different financial institution.
As you pay off your mortgage, the coverage of your home loan insurance plan decreases. If you have already paid Rs 10 lakh out of a Rs 30 lakh home loan, the insurance plan will only pay the bank Rs 20 lakh in the event of a mishap.
Also see: Does your home loan insurance cover Coronavirus?
Home insurance versus home loan insurance
There is a distinction between home insurance and home loan insurance. While the former safeguards your property in the event of a disaster, the latter will take care of your outstanding home loan if you are unable to pay due to unforeseen circumstances.
Tax benefits on Home Loan Insurance
Those who have obtained a home loan insurance policy can claim deductions for the premiums paid under Section 80-C of the Income Tax Act. However, you would not be able to claim the deduction if you borrowed money to pay the home loan insurance payment.
Who is eligible to purchase a home loan insurance policy?
Home loan insurance policies are available for purchase by property owners.
Is it necessary to purchase a house loan insurance policy while taking out a loan?
According to the Insurance Regulatory and Development Authority of India, it is not essential to purchase a house loan insurance coverage when taking out a loan. Banks are unable to refuse house loans to customers who refuse to purchase home loan insurance coverage.
What’s the difference between homeowner’s insurance and mortgage insurance?
Borrowers are covered by a home insurance policy in the event of structural damage to their homes. A house loan insurance policy, on the other hand, ensures that the borrower is protected if he or she is unable to repay the loan due to unforeseen circumstances.
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