Buying a home for personal use or for investment purpose, takes a considerable amount of our disposable income. The decision for buying a home is quite crucial and should be very well planned out. Being a huge capital investment, the tenure of the home loans are generally longer and the EMIs are quite higher. Taking a home loan is not the panacea to all our worries. Along with a home loan, there comes the responsibility of timely payment of high EMIs for multiple years.
Why Home Loan Insurance?
If you are the co-owner of a house and something wrong happens to you in due course of time, the co-owner (Your family member) will have to pay the remaining amount or else the house can be claimed by the financing organization. To prevent your family members from such kind of situations, there is an excellent option of home loan insurance to protect your home loan against contingencies.
Home Loan Insurance in Brief:
The home loan insurance protects your loan amount in case of contingencies. Since you are paying life insurance premium, you are eligible to get Income Tax deduction under section 80C (Interest payment on Home loan PA up to a maximum of Rs. 1, 50, 000 under section 24 of Indian Income tax act 1961). Several insurance companies are tied up with banks and provide a complete Loan-Insurance package. So it saves a lot of your time as you need not to search a separate insurance company after getting a loan. Also you can opt to attach the insurance cost (onetime premium) with the loan amount and the insurance premium will come added with your EMI.
Who are tied up with Banks?
In India, several private Insurance players have tie-up with Indian as well as Multinational Banks to provide home loan Insurance. Syndicate bank is tied up with TATA AIG Life, IDBI with Birla Sun Life, HSBC with TATA AIG Life, Bank of India with Star Union Dai-chi Life, United bank with United Insurance Co, ICICI with ICICI Lombard, HDFC with HDFC Life, Union Bank with SBI Life, Corporation Bank with Life Insurance Corporation of India.
Example of Home Loan Insurance:
Suppose you are buying a flat in Mumbai suburbs and want to raise a home loan of Rs. 60, 00, 000 (Rs 6 Million) from IDBI bank which has tie-up with Birla Sun Life Insurance Co Ltd. The home loan insurance company charges a onetime premium of Rs 2, 00,000 (imaginary). Now you can raise a loan of Rs. 62, 00, 000 or make a cash-payment of Rs 2, 00,000 whichever suits you. Now you’ll pay EMIs and the home loan interest is tax deductible up to Rs. 1, 50, 000.
While providing a home loan, Insurance companies check the Age of the life insured, loan tenure, medical check-up (mandatory above 40 years) and lapse of cover if death occurs within 45 days. Some insurance companies (ICICI for instance) provide free accidental death cover. Some provide clauses on complete or partial disability. So a good home loan insurance plan protects your home and money.
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