What is a Home Loan Protection Plan?

The only thing guaranteed about life is its unpredictability. As the breadwinner of a family, it is your responsibility to ensure that your dependents have a financially stable life even after your death. Your loved ones should not be left with the burden of your liabilities in case of your unexpected demise.If you are planning to take a home loan or are already repaying one, the best way to ensure that is through a Home Loan Protection Plan (HLPP). It is a type of insurance that you purchase for covering your loan repayment in case of your demise.

A home loan is a long-term commitment, with most borrowers opting for tenures ranging from 20-30 years or even more. In case of a home loan borrower’s unforeseen demise, the burden of repaying the loan then falls on to their family members.HLPP is a type of term insurance plan that can protect your loved ones from this liability. In case of the borrower’s demise, the insurance provider will repay the outstanding loan amount to the lender so that your family members are not required to repay the loan.

Features of Home Loan Protection Plan:

• Home loan borrowers can purchase HLPP like any other type of insurance product.
• Once purchased, the insurance will keep you covered throughout your home loan repayment tenure.
• In case of your unexpected death, it will be the insurance provider that will be responsible for repaying the outstanding loan amount.
• In many cases, if the family members are unable to repay the loan, the property is often seized by the lender. This can be avoided by purchasing an HLPP so that your dependents don’t end up losing valuable property.

Things to know about a Home Loan Insurance :

• HLPPs generally have a one-time premium that you pay at the time of availing the loan. However, you do get the option to club this premium amount with your home loan EMIs. For instance, if you are taking a home loan of Rs. 50 lakhs, and the premium for your HLPP is Rs. 2 lakhs, you can take a loan of Rs. 52 lakhs and pay the policy premium through your monthly EMIs. With this option, you can eliminate the burden of paying the entire premium at once.
• You can purchase HLPP while taking a home loan. Most lenders now offer these protection plans. Some of the lenders also club HLPP with their home loan offerings. However, note that as per the IRDAI regulations, it is not mandatory to purchase an HLPP with your home loan, irrespective of whether your lender is selling it separately or has clubbed it with the home loan.
• Lenders often encourage borrowers to purchase HLPP as it helps them protect their loan, turning into bad debts. If the borrower has a home loan insurance, it also helps the lender as they are certain of the repayment.
• Yes, many of the lenders and insurance providers now also offer a variety of rider or add-ons with Home Loan Protection Plans . For instance, HLPPs do not cover accidental deaths. But you can purchase an accidental death rider to enhance the scope of the policy.
• Similarly, there are other add-ons such as terminal illness, disability, and job loss for up to 6 months. These riders are an effective way to get additional protection with your home loan insurance.

While nobody generally likes to think about death, it is the biggest reality of our life. It is your responsibility to ensure that after your unexpected demise, your liabilities are not transferred to your dependents. An HLPP is one of the most effective ways to avoid this scenario in case if you have a home loan.If you are concerned about your home and the financial stability of your loved ones after your demise, HLPP is one insurance product that deserves your attention. Consult your lender to know more about this insurance so that you can purchase one at the earliest.

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.