Secure With The Best Home Loan Insurance Policy In India
Secure With The Best Home Loan Insurance Policy In India
Life is unpredictable, This thought remains in the mind of the applicant, as the home loan tenure is long which can extend up to a maximum of 30 years.
Hence, it is prudent for the applicants to keep this idea in mind and plan accordingly.
However, it is not mandatory to buy Best Home Loan Insurance Policy while taking any loan from banks, NBFCs, or housing finance companies.
If a person is taking a home loan from a loan institution, then it is not mandatory to buy a home insurance scheme as per RBI and IRDAI.
Table of content
- What is Home Loan Insurance?
- Features and Benefits of Home Loan Insurance
- Why is it mandatory to take a home loan?
- Home Loan Insurance Premium
- home loan insurance Vs home insurance
- Types of Home Loan Insurance
- FAQ/Frequently Asked Questions
1- What is Best Home Loan Insurance Policy ?
Home Loan Protection Plan (HLPP).
It is a scheme offered by almost every loan institution, in which the insurance company compensates the loan borrower for his remaining loan in case of sudden demise.
The tenure of the insurance is usually the same as the loan tenure. Taking advantage of home loan insurance provides relief to the borrower.
After his death, his family will not vacate the house due to non-payment of a home loan or loan amount.
2- Features and Benefits of Best Home Loan Insurance Policy
- Home loan insurance provides a lump-sum benefit, which is used to pay off the outstanding home loan in the future.
- The policy may terminate when a home loan balance transfer, home loan restructuring, or full repayment of the loan amount.
- An amount is paid to the beneficiary of the home loan or policyholder.
- Under Section 80C and 80D, the policyholder gets tax benefits from the home loan.
- Under a joint loan, a single home loan insurance can cover all the borrowers.
- In critical conditions like disability and critical illness can also be covered under a home loan insurance plan.
- The insured can pay the premium by single/regular payment, or the sum assured can be clubbed into the total loan amount and paid on an annual basis.
- The insured also has the option of adding the insurance premium to the home loan EMI.
- Home loan insurance provides coverage for medical ailments, including cancer and heart attack, among many others.
- Home loan insurance does not cover death or suicide due to natural causes.
3- Why is it mandatory to take a Best Home Loan Insurance Policy ?
Be it the Reserve Bank of India or the insurance regulator IRDA, no one has made any such rule that it is necessary to take insurance with a home loan.
However, many banks or finance providers have started offering insurance to customers by adding it to the loan.
The decision to buy an insurance plan with a loan or not is entirely up to the customer. They cannot be forced to buy the cover.
4- Home Loan Insurance Premium
The premium for home loan insurance depends on three main things.
- the age of the insured.
- loan amount
- Medical history of the insured.
Home loan insurance premium also helps in protecting the property/house from being confiscated by others.
Thus, it becomes necessary for the insured to opt for it for some important purposes.
5-Difference between home loan insurance and home insurance
So Many times people do not understand the difference between home insurance and home loan insurance.
These two terms are different and serve different purposes.
Under home insurance, your insurance covers your home against risks that include.
- Damage to house/property due to theft
- Damage due to natural calamities like earthquakes, storms, floods, fire, etc.
Home insurance is insurance that covers the replacement value of your home in case of loss, and home loan insurance covers the loan taken by you to buy the property,
This plan only covers the value of the loan from the time you take the loan.
Most banks and NBFCs have made home loan insurance mandatory whereas, home loan insurance is not required and depends on the loan applicant or the borrower.
6- Types of Home Loan Insurance
Banks and NBFCs offer three types of home loan insurance which include level plan, hybrid plan, and reducing plan:
- Level Cover Plan: The coverage remains the same for the insured during the loan tenure.
- Hybrid Cover Plan: The coverage remains complete during the first year. As the Zee Loan amount decreases, the cover also gets reduced.
- Deducting the cover plan: With the tenure, both the coverage and the outstanding loan get reduced.
7- FAQ/Frequently Asked Questions
Q.1. Is home loan protection insurance eligible for tax deduction?
No, home loan insurance is not eligible for a tax deduction in most cases, and home loan insurance premium is not included in the property payment.
Q.2. Is it mandatory to take insurance with a home loan?
No, that’s not mandatory to take home loan insurance, but it is like an added benefit. If you take it, you will not be at a loss. If you have taken home loan insurance, then the bank will not auction your house despite any emergency.
Q.3. Is there any tax benefit in Home Loan Insurance?
Yes, if the premium is paid by the home loan borrower himself, he is eligible for tax deduction under section 80C and section 10(10D). Up to Rs 1.5 lakh claimed under section 80C.
Q.4. Where can I get home loan insurance?
If you take a loan from the bank or non-banking financial company (NEFC), they also provide home loan insurance.
Apart from this, if you do not want to take insurance from there, then you can also take home loan insurance from insurance companies.
Q.5. What is the premium to be paid in home loan insurance?
You have to pay a premium of 2 to 3 percent of your sum insured to the company. Insurance companies decide the insurance premium based on the loan amount, loan tenure, age, and income of the borrower.
Q.6. When will you not get the benefit of home loan insurance?
If the home loan is shifted to someone else’s name or closed prematurely, then the insurance cover ends. Cases of death or suicide are also not covered under the scheme.
If you transfer the loan to another bank, the home loan insurance is not affected.
Q.7. Which is better between single and annual premium?
These policies have two advantages.
- You don’t have to worry about the renewal date as there is no renewal in it.
- Such products are cheaper as the commission is limited to 2%, the insurance company gets a better return on investment, and the service charges are lower.