Home loans are a huge and a long term debt that exhausts the borrower of all the savings and finances he/shes has saved for all their employed years and to be. Most get their homes that is well and good but a few people may be deprived of it if they have not exercised prior precaution. In case of death or disability, have you ensured that it is the home and not the home loan that has been passed on to your dependents?
Home loan insurance covers provide you with this option of repayment of the EMIs or the entire loan if the policyholder dies. Most of such kind of insurance policies will be provided by the banks from where you take the loan from. For example ICICI Bank’s customers, when they avail a loan, will also be able to buy a cover for the same from ICICI Prudential Life insurance. Although insurance covers are available for various other loans like personal loans, car loans etc, but home loan insurance can be used for the precise need.
The premium amount basically depends upon the loan amount, tenure and age of the borrower, however customers can get to choose the initial sum assured equal to the loan amount or the outstanding amount.
Why should you go for it?
If you really love your family, and want your dependents to benefit from passing on the house rather the loan, you should definitely go for it. The insurance is used to pay the outstanding or the loan amount on the house to the bank. And if there is an outstanding amount left with the insurer, after paying off the loan amount, then, on obtaining a No Objection Certificate (NOC) from the bank, is given to the eventual policy holder on the event of the death of the the borrower. Usually, this surrender value calculation is mentioned on the certificate of insurance (CoI), which is communicated to the customer upfront.
What can be a better option?
Most financial planners admit that, it is best to go for a insurance cover that comes along with the loan. Further leading to, the cost incurred for acquiring a loan insurance, be transferred to your EMIs. Making your work a less hassle free. Loan insurance policies are cheaper than compared to individual term cover and in case of most insurers underwriting norms are concerned, the non-medical limits are quite high compared to term plans as in home loan covers. The only disadvantage being since, the cover decreases as the amount of the loan goes up. But for those insured prior to taking a loan, credit insurance might be a better option.