Home Loan Insurance - All You Need To Know

Though taking a home loan is a convenient way to arrange money for purchasing the house, it requires a long-term commitment from you. The tenure of these loans may go up to 20 or 30 years, and in case of any mishaps with you during this time, the burden of loan repayment may fall on your family.An insurance policy for your home loan gives you protection against this risk. In case of your death during the repayment tenure, the remaining debt is paid off by the insurance company and the asset remains with your family.

A home loan protection plan offers many advantages such as;

• Protection of Asset: In case of demise of the home buyer before paying off the loan, a protection plan ensures the family still gets to keep the asset while the insurance company takes care of the remaining debt.
• Peace of Mind: A home loan protection plan ensures you and your family have peace of mind. Some plans also come with add-on riders which pay off the debt even in situations such as unemployment, disability, etc.
• Tax Benefits: The premium paid towards your insurance plan can be claimed for tax deductions under Section 80C .

Insurance for home loan provides coverage for the remaining loan repayment amount, in case of the borrower's death. It can be viewed similar to a term life insurance , but the sum assured keeps reducing as you pay the EMIs. At any point, the assured sum will be the remaining amount to be paid at that time. However, there are policies that pay a fixed amount to the beneficiary irrespective of the remaining debt amount.

Though the eligibility criteria may differ for different companies, generally people between 18-50 years are eligible to apply for it. Few banks also consider the maximum age of the borrower, at the time of policy expiration. Also, generally after the age of 40 years, a medical test is required to apply for the policy.

The premium for home loan insurance usually depends on a few factors, such as:

• Your Age: Like most other insurance policies, the home loan plan premiums are usually lower for young borrowers and goes up as you age.
• Loan Amount: The higher the loan amount, the higher the premium.
• Loan Tenure: Premiums can be higher for longer tenure loans.
• Medical History: The premium may increase in case the borrower has any medical history such as diabetes, a heart condition, etc.

Unlike other insurance plans where you have to pay annual premiums, most home loan protection plans come with single premium payments. However, you can club it with your home loan and pay it through a single EMI.

You may go for a home loan policy from any company but do good research and compare all the available options, before choosing the right one for yourself.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.