Provide financial security to the family by insuring the home loan, in case of natural death, the family will not be liable for the loan.
The home loan protection scheme is similar to a term insurance
The bank or NBFC from which you take a loan also provides you with home loan insurance
Nowadays most people take the help of a loan to buy or build a house. But for a family with only one earner, a loan lasting 15 to 20 years is no less than a liability. Because the person loses his job, suffers from a serious illness or dies in an accident, the tension of paying EMI increases. Home loan insurance can be helpful in this situation. Home loan insurance is also commonly called home loan protection plan.
Benefits of taking home loan insurance
If the borrower dies, the remaining EMI is credited through this insurance and your home is safe.
This responsibility will not fall on another member of the household as there is insurance cover. Sometimes the bank also merges the amount of insurance premium into EMI. Even so, owning one is still beyond the reach of the average person.
Home loan insurance covers the death of the borrower in an accident or permanent disability.
A home loan protection scheme is like a term insurance. This means you can decide the duration of the insurance yourself. That is how your premium is determined.
Insurance cover is also available for serious illness of the borrower. The insurance company pays 3 months EMI if the borrower loses his job due to any reason.
Would it be worthwhile to take out this insurance?
Neither the Reserve Bank of India nor the Director of Insurance, IRDA, has made it a rule to take out insurance with a home loan. However, many banks or finance providers decide whether or not to buy this type of insurance plan. The borrower is not forced to cover.
What is the difference between home insurance and home loan insurance?
It is important to understand the difference between home insurance and home loan insurance. Home insurance covers theft of home and belongings, damage from natural disasters. Home loan insurance helps to pay the EMI if something happens to the person taking home loan for any reason. However, the rules of an insurance policy should be read carefully before taking out insurance on a home loan.
Where can I get loan insurance?
The bank and non-backing financial company (NBFC) from which you take a loan can also give you loan insurance. Apart from this you can also take it from the insurance company.
How much premium will have to be paid?
The insurance premium is 2% to 3% of the total amount. The premium of the insurance company insurance is determined by the loan amount, the term of the loan, the age of the borrower and the income.
How much will the EMI increase if you take a loan from a bank and also take its insurance?
These types of insurance policies usually have a single premium option instead of a regular annual payment. Assuming your bank approves a home loan of Rs 22 lakh for you and provides home loan cover for twenty years at a premium of Rs 90,000, your total loan will be Rs 22.90 lakh. If the interest rate is 10% per annum then your EMI will be Rs. 20,169.
On the other hand, if you had not taken insurance cover, your loan would have been only Rs 22 lakh and the EMI for 20 years would have been Rs 19,300. This way your EMI will decrease by Rs 869 per month for twenty years. This means that if you take out home loan insurance, you will have to pay an additional Rs 208,560 over the entire term of the loan, whereas the bank has paid only Rs 90,000 for it. He is also getting interest on this amount.
Which is better in single and annual premium?
There are two advantages and one disadvantage to a single premium payment policy. The first advantage is that you don't have to worry about the renewal date because it doesn't have a renewal. Another advantage is that the product is cheaper because the commission is limited to 2%. The insurance company gets a better return on investment and the service charge is lower.
The disadvantage of a single premium policy is that the amount paid as upfront has to be paid together which is very large. Suppose a 40-year-old person takes out an insurance policy worth Rs 30 crore, amounting to Rs 1 crore. The single premium for this will be Rs 3.3 lakh and the annual regular premium will be Rs 23,000.
Most people earn Rs. Prefers to pay a premium of Rs 23,000, even if they have to pay Rs 6.9 lakh in 30 years because paying the annual premium is fair in terms of income and people have the option to turn it off in the future if not required in the future.
When will you not get the benefit of insurance?
If the home loan is shifted to another person's name or closed prematurely, the insurance cover expires. Cases of natural death or suicide also do not fall under the purview of the Home Loan Protection Plan. However, if you transfer, pre-pay or restructure a loan to another bank, home loan insurance will not be affected.
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