Is your home loan insurance really free with the loan?

Last Updated: Sat, Jun 09, 2018 11:20 hrs
Home loan

Are you thinking of taking a home loan and you have already got numerous attracted proposals from many financial institutions? Well, it is a good thing, besides different repayment options and interest rate, don't forget to consider the insurance aspect.

Late, but banks have started considering to build innovative home loan insurance under which the insurance company will repay the amount on the behalf of the borrower in case of his/her demise. Yes, the insurance company will repay the outstanding amount along with loan in case of borrower's death.

Upon asking different banks for a home loan, you may notice that most bankers insist on taking a home loan insurance cover. What is it?And why the bankers consider it as an essential thing.

While taking a home loan, have you ever thought what if something happened to you? How will your family manage? It will surely be an additional burden on your family. With an effective home loan insurance, you and your family will have peace of mind and does not have to worry about the repayment of the home loanincase of any unfortunate event.

Well, many banks will make sure to let you know about the cost attached to the home loan insurance whereas some bankers add it as an EMI component and claimed to offer the same for free.

Many banks of the private sector have come out with one-time premium payment option for the home loan insurance. Fore.g, if you are taking a loan of Rs 50 lakh and the insurance cover costs Rs 1 lakh for the same, then the banker will say that the total loan amount was Rs 51 lakh.

Well, in such cases the deals will look reasonable, but you should make sure that there is no interest cost attached to your premium which you are actually paying for loan term.

What are the attractive features of home loan insurance:-

  • Tax benefits
  • No medical tests
  • Additional personal accident rider (varies from insurer to insurer)

Because of low penetration in India, bankers and insurance company are using every possible opportunity to sell home loan insurance policies.

It is helping banks in reducing the risk on the already increasing home loan NPA.

A home loan refers to be the largest liability of a person's life and they spend almost around 40 to 50 percent of their income on paying home loan EMIs. In such cases, a home loan insurance is a necessary thing that will secure future against the unwanted crisis.

Usually, home insurance is not something in which the insurance agents deals, as for banks it is easier to offer a policy to the applicant when the applicant reaches for a home loan. If they placethe agent intheir branches, then they might have to wait for numerous customers to lastly find the one.

While looking for a home loan insurance plan and getting the insurer who is ready to provide the same without the medical tests and without submitting a health declaration, the deal may be worth looking at.

In such cases where you feel that the insurance deal offered by your insurance company is not good enough and other home loan insurance companies are not ready to entertain you because you haven't taken the loan from them then it is advisable to go for a term insurance plan. It will act like a savior in the hour of need.

Under the term plan, the borrower can insure himself/herself to the extent of the loan. Under the same, in case of demise of the insured, the family will get the entire sum assured amount and home loan amount. The insurance company will pay entire home loan amount and not just the pending amount to be repaid to the bank.

Term insurance refers to be the best plan to fight against such harsh eventualities like the demise of the insured, disability and much more. It provides the needful financial assistance to insurer's family in case of need.

Home loan insurance is something that you must look for. You never know what is waiting for you in the future. With such great insurance plan, you are offering the needful financial cover to your family which will surely lessen the burden.

Naval Goel is the CEO and Founder of PolicyX.com.

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