Home loan protection plan – Should you opt for it?

Buying a home

Abhijeet is the proud owner of an expansive apartment in Mumbai, but not a lot of people know that he had to face some sleepless nights to buy his dream house. The long term home loan which he had taken for the apartment was haunting him. With the family’s responsibility on his shoulders, he was finding it pretty difficult to repay the loan and his health too was taking a toll day by day. He knew that if he missed out on a single monthly payment, he would be held as a defaulter. Therefore, he decided to go for a home loan protection plan.

Home loan protection plans are innovative insurance covers which are specifically meant for housing loan borrowers. They offer a lump sum benefit to the borrower in the event of the death of the insured. So, anyone who wishes to protect the decision of purchasing a home can go for such protection plans.

Have a closer look at the features of the some of the popular home loan insurance plans available in the market.

As on 7^th April, 2014

Why are home loan protection plans required?

Everybody would agree with the fact that the decision of buying a house is a very important one, both mentally and financially. People who plan to buy a house using a home loan need to act smart by choosing house loan protection plans. This plan not only secures the interest of an individual who is young and dynamic, but a middle aged worker too could opt for this plan. In case of the unfortunate death of the borrower, the insurance company pays the rest of the amount to the bank, thereby keeping the other family members out of the risk. So, you don’t have to worry about your dependants because this plan will take care of them even when you won’t be there.

Home loan protection plans are known to cover the entire amount of loan taken by the borrower. People do have the alternative of paying premium as a lump sum amount or through EMIs. The sum of money assured here is claimed only on the death of the borrower. However, popular institutions like Kotak Life offer various plans where claim can even be made on critical illness or the permanent disability of the borrower. One of the common features of several house loan protection plans is that they assess the premium amount based on the remaining sum to be paid every year. Therefore, the overall cost of the insurance cover also gets reduced significantly. You should never take up a plan hastily because it is better to carry out some research upfront than to regret later on.

The Different Costs of HLPP

Home loan protection plans come with costs that are quite similar to those of term insurance. Every borrower needs to carefully study the different costs related to such plans as they can impact the overall cost of insurance in a big way. There are various payment options such as:

• Single premium method
• Equated Monthly Installment
• Limited Pay Option

What happens in the event of survival?

Loan protection plans usually do not offer any benefits to the insurer if he survives. This is one of the major drawbacks of the policy that keeps a lot of people away. The home loan insurance cover is legally valid for the entire loan’s duration which can definitely be termed as a benefit. For most of the people, their home is the biggest asset they have and so protecting it with this plan can be a feasible option to consider.

Term Insurance Holders

One of the crucial things which you might not be aware of is that if you are already secured with a term insurance plan, you don’t really need to go for a HLPP. Instead, you could use the term insurance policy to cover the costs related to your home loan. By having a term insurance instead, you don’t have to invest heavily in a house loan protection plan. Home loan protection cover functions basically as a term insurance as it offers coverage at set rates of payments for a specified period. This insurance policy even acts a collateral security that could benefit the family of the deceased.

The choice of going for a home loan protection plan is entirely a personal one. As a borrower, you must study your case well and then take a decision whether you should go for such an insurance cover or not. Get the best deals on home loan protection plans at https://www.bankbazaar.com/home-loan.html.

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