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Home loans have become extremely popular in today’s world, but the personal and financial risks involved with them have increased too. Therefore, to protect you in such situations it is recommended to purchase an additional insurance with home loan known as the home loan insurance. To better understand the concept of home loan insurance, let’s understand what it means and analyze its features and benefits
When you purchase a home loan, you are bound to pay its EMI regularly to the lender. However, due to unforeseen emergencies, you might experience a financial crunch which would result in default of EMI payment. This is where home loan insurance will help you as the insurance company will settle your outstanding home loan amount with the lender.
There is always confusion amongst people about home loan insurance and home insurance. While home loan insurance clears your home loan debt, home insurance offers coverage to your home and its contents against emergencies like fires, explosions, lightning, theft, burglary, etc.
A majority of home loan insurance plans have a one-time premium. The lenders often add this premium amount to your home loan amount i.e., you pay for the premium along with your monthly EMI instalments.
For example, you have purchased a home loan of Rs 40 lakhs and the premium for your home loan insurance is 2 lakhs. Your monthly EMI will be calculated for 42 lakhs.
Home loan insurance plans also offer life cover. The amount of life cover in this plan is equivalent to your outstanding home loan amount. The cover is valid or offered only until the clearance of the loan.
Several home loan insurance plans offer optional add-ons to enhance the cover benefits. Some add-ons offered are mentioned below-
You can buy home loan insurance in two forms- either as term insurance or separate home insurance.
Term Insurance– This policy covers all your liabilities and debts in case of emergencies.
Separate Home Insurance– This policy only clears the outstanding loan debt.
Make sure that you are financially stable before purchasing insurance with home loan, as the total cost of EMI’s and premiums might take a toll on your savings. Also, make sure to compare different policies in the market to get the lowest premium amount with the best coverage.