Many people purchase new houses by taking a home loan from the lender. But this might also increase the risk profile because you owe the money to home loan lender. Therefore, it is highly recommend to go for a home loan protection plan.
Home Loan Insurance plans are the policies that cover the home loan liability. It covers the structure and the contents of your house. They are also known as mortgage redemption plans.
You might be snowed under with payment dues and equated monthly payments but in case something happens to you, the loan amount will still have to be paid back. If there is no other earning member in the family then your home will be taken away by the authorities. Hence, it is always advisable to get a home loan insurance in order to protect the family.
For example in case you have taken a loan of 35 lakhs and about 10 lakhs has been paid back, so 25 lakhs are still yet to be paid. At this point in case something happens to you or you meet with an accident and their wont be any income to make the payment. So your home might be at the risk of getting re-possessed by the home loan lender.
In home loan insurance policy, your insurance cover keeps decreasing as the home loan amount reduces when the EMIs are paid according to the loan repayment schedule. However, there are several plans with various schemes and benefits. The coverage can be on the reducing balance as well as on flat basis or one can get a specific policy.
If there is a death of the person then the home loan is cleared off and rest of the amount is paid to the family. These plans offer low premiums and more coverage. There is no maturity amount. Also, a choice is given for regular premiums or one time premium. The price of the home insurance policy depends on the home loan amount, home loan period and borrower’s age.
The minimum age for the home insurance policy is 18 years and one can buy the Home Loan Insurance plans till the age of 60 whereas term plans can be bought only till the age of 55. The policies may ask for tests and the premiums depending on the medical underwriting.
The premium issued by the Insurance policies have the eligibility for deductions under section 80C. If the premium is pooled within equated monthly installment of the loan then one cannot avail the section 80C benefit. However in case of terms plans the cost is less and it remains constant.
Several financial institutions offer home loan insurance plans. HDFC bank has a Home Loan Protection Plan policy. The minimum single premium is Rs. 2000 only. The payment options are wither single premium can be paid in advance or along with housing loan EMI according to the regular installments.For more information visit HDFC Bank.
For more information about the Home Loan Insurance Plans one can visit Guide To Home Loan.
HDFC bank has an insurance plan called “HDFC Loan Cover Term Insurance Plan” and with this plan home loans taken from any financial institutions like AMN Amro, ICICI, SBI, Citibank, etc can be covered.
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