- Home loan protection scheme is similar to a term insurance
- The bank or NBFC from which you take a loan also provides you home loan insurance.
Nowadays, most people resort to loans to buy or build a house. But for a single earning family, a loan of 15 to 20 years is less than a liability. Because the person loses their job, suffers from a serious illness or dies in an accident, the stress 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 protected.
- As a insurance cover, this responsibility will not fall on any other member of the household. Sometimes the bank mixes the amount of insurance premium into EMI as well. Nevertheless, owning a person is still beyond the reach of the average person.
- Home loan insurance provides cover in case of accidental death or permanent disability of the borrower.
- The Home Loan Protection Scheme is like a term insurance. This means that you can decide the period of insurance yourself. This way your premium is determined.
- Insurance cover is also available in case of critical illness of the borrower. The insurance company pays a 3-month EMI if the borrower loses his job for any reason.
Will it be worthwhile to take insurance?
Anyone, be it the Reserve Bank of India or IRDA, has made it a rule to take insurance with a home loan. However, many banks or finance providers decide whether 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 includes theft of a home and its contents, damage from natural disasters. If something happens to a person taking a home loan for some reason, home loan insurance helps pay EMIs. However, the rules of the insurance policy must be read carefully before taking insurance on a home loan.
Where can I get loan insurance?
The bank and non-banking financial company (NBFC) from which you take a loan can also give you loan insurance. Apart from this, you can also take it from an insurance company.
What is the premium?
The insurance premium is 2% to 3% of the total amount. The insurance premium of the insurance company is determined by the loan amount, the term of the loan, the age and income of the borrower.
If you take a loan from a bank and take its insurance, how much will the EMI increase?
- These types of insurance policies usually have a single premium option instead of regular annual payments. Suppose your bank accepts a home loan of Rs 22 lakh for you and provides a home loan cover for twenty years at a premium of Rs 90,000, then your total loan will be Rs 22.90 lakh. If the interest rate is 10% pa 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. In this way your EMI will decrease by 869 rupees every month for twenty years. This means that if you take home loan insurance, you will have to pay an additional Rs 208,560 for the entire duration of the loan, while 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 premiums?
- There are two advantages and disadvantages of a single premium payment policy. The first benefit is that you do not have to worry about the renewal date because it does not have a renewal. Another advantage is that the product is cheaper as the commission is limited to 2%. The insurance company gets a better return on investment and the service fee is lower.
- The disadvantage of a single premium policy is that the amount paid as an upfront has to be paid simultaneously which is very large. Suppose a 40-year-old person takes an insurance policy of 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 get Rs. Prefers to pay a premium of Rs 23,000 even if he has to pay Rs 6.9 lakh in 30 years because paying the annual premium is justified in terms of income and people have the option to discontinue it in future if not required Option.
When will you not get the benefit of insurance?
If the home loan is transferred in the name of another person or is prematurely closed, the insurance cover expires. Cases of natural death or suicide also do not come under the purview of a home loan protection plan. However, if you transfer, pre-pay or restructure a loan to another bank, home loan insurance will not be affected.