Should You Opt for a Home Loan Insurance?
Purchasing a home in India is analogous to fulfilling a dream for many individuals. Most homeowners Opt for a Home Loan from a reputed bank to realise their ambition. The loan is usually for a period of up to 30 years based on their financial plan, but, what happens if you pass away due to an unexpected event?
In such a situation, the entire burden of the equated monthly instalments (EMIs) and paying the interest falls on your family members. To ensure that your family doesn’t suffer and can live peacefully in the home you have purchased, you need to opt for home loan insurance.
Types of Home Loan Insurance
There are two types of home loan insurance policies available in India. These are as follows:
a) Reducing Cover Plan
The reducing cover plan is one of the most common home loan insurance plans that is offered with the Home Loan by banks. Under this plan, the insurance coverage reduces as your loan liability reduces. This means that in case you pass away before you completely repay the loan amount, the insurance company will pay the remainder of the loan amount.
b) Fixed Cover Plan
In the fixed cover plan, the coverage is of a fixed amount that doesn’t change as your loan liability decreases. It remains fixed throughout the coverage period. The added benefit of this is that your family will be provided with the remaining amount after paying off the loan entirely in case you are no more.
3 Benefits of Opting for a Home Loan Insurance
Although some home-owners consider home loan insurance to be an unnecessary investment, they are not aware of the multiple benefits that a home loan insurance offers. These are:
a) Tax Benefits
Even if you opt for a Home Loan, purchasing a house is an expensive affair. Home loan insurance provides significant tax benefits on the insurance premium paid under section 80C of the Income Tax Act, 1961 to ease your burden.
b) Critical Illness Rider
The critical illness rider can be added to your home loan insurance plan at a nominal fee. With this, the insurance company will cover your Home Loan amount if you’re diagnosed with a critical illness and are unable to repay the loan amount.
c) Financial Security
If you are the sole breadwinner of the family, your family members may get affected financially in case of your unexpected demise. In such a situation, a Home Loan will become a massive liability that they might be unable to repay. With a home loan insurance plan, they will have the finances to take care of such situations.
A Necessary Investment
Initially, a home loan insurance might seem like an unnecessary expenditure. But, pause and imagine a scenario wherein the obligation of repaying a Home Loan falls on your family members if you die. They may have to use up their savings or borrow money to repay the loan. You can avoid this by making a one-time payment while applying for your Home Loan. Home loan insurance will ensure that your family does not suffer financially when you’re no more.
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