You have chosen your dream home, got the loan sanctioned and in a matter of months, you have now shifted to your new home, started paying your EMI, and start indulging in the making your living space as comfortable as possible etc.Have we ever thought what if the loan borrower is not able to pay the home loan because of accident or some other reason?
Will his or her family have to move out of the house?
What will happen if the borrower is the only earning member of the family? These are important questions but we seldom think about it.
Essentially, is there any way to ensure our home is ours despite these emergencies we may have to face in future?
Home loan insurance
Home loan insurance covers the loan liability of the borrower.
If the borrower, because of accident or death, is not able to pay back the home loan, the insurance companies will pay the loan.
Some insurance companies may pay just the outstanding while some pay the full loan.
This means that your family will not have to move out of the home.
This is very important for families where the only source of income is job. Home loan insurance doesn't cost much and hence this is advisable to take home loan insurance.
Home loan and loan insurance
Banks usually suggest borrowers to take home loan insurance but this is not mandatory.
There are cases banks have packaged the home loan insurance with loan and offered as bundle.
However, irrespective of whether this is mandatory, you should take home loan insurance to protect your family from unnecessary financial and psychological distress in any eventuality.
Borrowers may not opt for the home loan insurance and can still get the loan financed.
Some of the banks also give time to borrowers to apply for home loan insurance within the specified period. This means, you can take decision after due diligence.
The advantage of home insurance loan is that the payment of loan is done between the bank and the insurance company without your family running after insurance companies to pay to the bank.
Offers from different institutions
Most of the financial institutions, in collaboration with insurance companies, offer home insurance loan or simply protector plans that cover any kind of loan.
Here are the examples of insurance companies' offers in home loan insurance space.
Readers are advised to consult these institutions for their individual cases.
| Insurance Companies | Plan | Tenure | Amount | Sum assured | Description |
| HDFC | Home loan protection plan | Up to 30 years | Minimum single premium is Rs 2000 per annum. It varies with individuals. | Decreasing sum assured. Maximum is 30 lakhs | Single premium facility available, applicable on outstanding, premium can be clubbed with home loan |
| ICICI Prudential | Home Assure | Up to 30 years | Minimum single premium is Rs 6000 per annum. It varies with individuals. |
No limit | Single premium facility available, applicable on outstanding, premium can be clubbed with home loan |
| SBI Life | Dhanaraksha Plus SP | Up to 30 years | Depends on individual cases | No limit | Single premium facility, available for wide range of loans |
| Bajaj Allianz | Bajaj Allianz protector plan | Up to 30 years | Depends on individual cases | No limit | Single premium or regular premium payment, |
- If the borrower has decided to take the home loan insurance, he or she should keep the following points in mind.
- The borrower should understand the coverage amount.
- The insurance may cover only the outstanding or the full loan amount.
- The borrower should know that in any case, the premium will be directly proportional to the size of coverage.
- The home loan lenders have collaboration with insurers to offer both as a package.
- The insured premium is added in the total loan and the borrower can pay loan and premium in EMI form.
- Do research into the premium paid to several insurers for home loan insurance. It is advisable to pay for the insurance upfront than attach it to EMI.
- The borrower should look at the tenure of coverage. Longer tenure is always preferable.
- Finally, the borrower should also find out if the insurance benefit covers death, disability, or general loss of income because of any reason. Most insurers cover death.
