Home Loan Insurance – The consumer, after his premature death, does not want his family to be burdened with home equity. The Borrower also fears that if something unexpected happens to him in the near future, the one who will repay the remainder of the home loan will be reimbursed.
- Life is unpredictable; This idea becomes more and more recurrent in the borrower’s mind since the mortgage is tied up in the long term, which can be a maximum of 30 years.
- Therefore, it is advisable for borrowers to keep this idea in mind and to plan things accordingly. However, mortgage credit insurance is not required if you are borrowing from lenders, including banks, NBFCs or real estate finance companies.
According to regulators such as RBI and IRDAI, the conclusion of household insurance is not compulsory if a borrower completes a home loan with a financial institution.
What Is Home Loan Insurance?
- Housing Loan Insurance, also known as the Home Loan Protection Plan (HLPP).
- Home Loan Protection Plan (HLPP) is a program offered by almost all financial institutions, where the insurer pays the amount of the remaining or outstanding mortgage loan out of the property. A borrower with the lender or the bank, if any unforeseen circumstances that may include the death of the borrower.
- Home Loan Protection Plan (HLPP) or Mortgage Insurance in simple terms can be called an insurance plan.
- If the borrower dies, the insurance company pays the remainder of the mortgage loan to banks, NBFC or real estate finance companies.
- The term of the policy usually corresponds to the loan term.
- The conclusion of a home loan insurance policy relieves the borrower that even after his disappearance, his family will not be asked to repay the home loan or to leave the flat because the loan has not been paid.
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Features and Benefits
Below are the features and benefits Of Home Loan Insurance:
- Loan insurance offers a lump sum that can be used to pay off the outstanding loan.
- The policy could be invalidated in the event of the transfer of the balance of the mortgage loan, the restructuring of the mortgage or the full repayment of the loan amount.
- The lump sum will be paid to the beneficiary of the mortgage or to the policyholder.
- Under sections 80C and 80D, the borrower enjoys the tax benefits of mortgage credit insurance.
- In the case of a joint loan, individual mortgage loan insurance can cover all borrowers.
- With a few additional premiums, illness conditions such as disability and serious illness can also be covered by home loan insurance.
- The borrower has the option of repaying the premium, ie the amount of the premium or the amount of the insurance can be adjusted to the total amount of the loan and paid annually.
- Borrowers have the option to convert the insurance premium into an amount that can be added to the EMI of the mortgage loan.
- This covers certain diseases, including cancer, heart attack, and many others.
- Home credit insurance does not cover suicide or death for natural reasons known as a natural death.
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Categorization Of Insurance Premium
Home insurance premiums depend on three main categories:
- The age of the insured or the borrower,
- The duration of the loan/loan amount,
- And the history of the insured or the insured person.
The home loan insurance premium also helps to prevent property/house from being seized by other people. For this reason, it is essential for borrowers in certain critical scenarios to choose this solution.
Difference Between Home Loan Insurance And Home Loans
People are usually confused between home insurance and mortgage insurance. These two terms are completely different and serve different purposes.
In-home contents insurance, your insurance covers your house against the following risks:
- Damage caused by theft of the house or property.
- Damage caused by natural disasters such as earthquakes, storms, floods, fires, etc.
- This means that home contents insurance covers the costs of replacing your home in the event of damage. Although mortgage loan insurance covers the loan you are taking to buy the property. This plan covers only the outstanding loan liability from the moment it arrives.
Most lenders have made home insurance compulsory. Considering that mortgage loan insurance is not compulsory and that this is at the sole discretion of the loan applicant or the borrower.
Types Of Home Loan Insurance
Lenders offer three types of mortgage lending, namely the phased plan, the hybrid plan and the plan to reduce coverage.
- Level Cover Plan: During the term of the loan, the cover remains the same for the insured person.
- Hybrid Cover Plan: coverage remains full in the first year. It begins to decrease as the balance decreases with the mandate.
- Reducing Cover Plan: The current coverage and loan will decrease with the mandate.
It is obvious that a borrower can take out a home loan insurance if he has not yet paid the term insurance.
term insurance and home loan insurance can not be compared in terms of characteristics, but have similarities between goals and benefits.
Borrowers who have taken out a home loan must necessarily opt for mortgage insurance to protect their family after a regrettable event. However, home loan insurance is not compulsory.
But most borrowers will consider it again before they take out a home loan from a lender.
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Frequently Asked Questions
Ans. For example, if you borrow a loan of 30 lakh and you choose to hedge a home loan for 1.5 lakh, you will need to pay your EMI, which is calculated on the basis of 31.5 lakh. Life Insurance – Most mortgage loans provide a life insurance policy that equals the outstanding mortgage loan.
Ans. Although it is important to take out insurance while you are borrowing, you are not required to do so either from a bank or from a non-bank finance company. … Neither the law nor the regulatory authorities such as RBI or IRDAI have prescribed the purchase of a credit protection plan with a loan.
Ans. Home credit insurance is a plan that covers the outstanding liabilities of the borrower to cover the risk of loss in the event of the death of the borrower during the term of the loan repayment. These policies provide coverage that decreases each year as the loan amount decreases
Ans.SBI has asked mortgage customers to take out property insurance covering only real estate affected by natural disasters such as earthquakes, floods, etc. more than twice the amount actually borrowed.