By Dheeraj Agrawal, Communication Professional
Even though the economy has been in recession for some time, the prices of houses in metro cities are still out of reach of most people. To buy a house without taking a home loan, only a few people can afford. And home loans take a long time to repay. Therefore, it is necessary to cover the liability of the home loan, that is, the home loan should be insured.
Why Home Loan Cover Is Necessary
A large part of the household’s monthly income goes into repaying the EMI of the home loan. Also, taking a home loan is a long-term commitment. Home loans can extend up to 25 to 30 years or more. We all know life doesn’t come with any guarantee cards. God forbid, but if something happens to the person earning a living during the period of debt, it can be difficult to run the house. In case the loan is not repaid and the instalments are not paid regularly, a situation may occur that the house or the collateral will be seized. In such a situation, the family may be forced to leave the house. Therefore, it is advisable to buy a life insurance policy to cover all your liabilities. And, in addition to your life insurance policy, you can take a home loan insurance policy to cover this financial liability.
How do you avail Home Loan Insurance?
Home loan insurance can usually be availed while procuring the home loan. It may or may not be available with the financial institution from which you are availing the loan. Sometimes, it is bundled with the home loan. While it is advisable to avail home loan insurance, it must be noted that sometimes it is sold as a mandatory part of the home loan, which should not be done. There are no Insurance regulations which mandate loans along with insurance. Hence, you must do your due diligence and pick an insurance scheme that suits your needs.
How does this Insurance Work?
Home loan insurance is similar to term insurance. You are covered under this insurance till the period of your loan repayment. Once the outstanding loan amount has been paid, the insurance term expires. However, if the individual who is paying the loan expires within the loan term period then the loan insurance can be claimed by the family to repay the outstanding home loan amount. This ensures that the house or the other assets as collaterals are not seized by the bank or financial institution.
Payment of Premium
Most home loan protection schemes come with a one-time premium payment option. Buyers also have the option to club the premium amount with the total loan amount. For example – if the premium amount on a Rs 50 Lakhs loan is Rs 2 Lakhs, then the buyer has the option of taking a loan of Rs 52 Lakhs. During repayment of the outstanding loan amount through EMIs, they can also club the premium in the EMI. But clubbing the premium isn’t a good idea according to financial planners.
It must be remembered that home loan insurance is not compulsory while availing home loan. However, as a means of securing your finances and assets, an insurance of this nature becomes important. Also, you do not have to buy the insurance immediately while availing a loan. You can buy the insurance later through some other financial institution or bank or portals that sell insurance. Home loan insurance not only provides a financial cushion to your family, but also the much needed peace of mind to you.
