Why Do You Need to Insure Your Home Loan?

Updated on: 14 Dec 2021 // 20 min read // Home Loans
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Due to the ever-increasing prices of residential real estate across all Indian cities, it has become virtually impossible for prospective home buyers to make an outright purchase of a residential property. But it does not mean that you need to give up on your dream of owning your home. With Home Loans being easily accessible, it has undoubtedly become possible for you to purchase your dream home, even if your savings fall short of the required amount.

What are Home Loans?

Home Loans are a secured financial offering, available from various financial institutions and are sanctioned only for the purchase of a residential property such as a flat, house or villa. The residential property purchased with the help of a Home Loan needs to be mortgaged with the lender as security. The tenure of a Home Loan can extend up to 30 years with the rate of interest starting from 8.35% p.a. The maximum amount available under a Home Loan can go up to Crores, depending on your requirement, profile, and financial capacity.

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How to Apply for a Home Loan

In order to avail a Home Loan to purchase the residential house of your choice, you need to check your Housing Loan eligibility as per the various parameters followed by the financial institutions in India. Every lender has a different eligibility criterion,and you must fulfil the prescribed parameters to be able to raise the required amount at the Current Home Loan Interest Rates.

With the rapid technological progress being witnessed in the finance sector, it has become really convenient for you to apply for a Home Loan. You just need to log-on to MyMoneyMantra, check the eligibility criterion, fill out the application form, and upload the necessary documents. If your profile fulfils the lending criterion, your application would be approved within a few days itself.

Should You Go for Home Loan Insurance?

Nowadays, when you avail a loan to purchase a residential property at prevailing Home Loan interest rates,you will be asked by the lender to get Home Loan insurance. This insurance is usually added to your Home Loan cost by the lender and is offered by an insurance company on their panel. The policy would remain in force for the entire duration of the loan,i.e., until you repay the whole loan amount along with interest.

Home Loan insurance is different from home insurance, as this type of insurance is meant to insure the repayment of your EMIs (Equated Monthly Instalments). Although the premium for the Home Loan insurance policy is paid by you, the real beneficiary is the lender. With a policy in place, the lender is assured of repayment from the insurance company, if something untoward happens to you and you are unable to repay the remaining EMIs. As the repayment tenure for a Home Loan can extend up to 30 years, there are chances that some mishap might occur with you. In such cases, your family members need not repay the lender for the remaining EMIs. Instead, the insurance company will be making the payment to the lender.

Benefits of Home Loan Insurance Policy

A Home Loan insurance policy has been made compulsory by most of the financial institutions operating in India. At first, you might think of it as an additional cost, but in fact, the benefits extended by a Home Loan insurance policy significantly outweigh the cost involved. Some of the significant benefits that would help you realise the importance of insuring your debt are as follows:

1. When you insure your debt through an insurance policy, you need not worry about repayment of the loan amount in case you lose your job or meet with an accident that causes permanent disability. The insurance company would be repaying the balance amount to the lender on your behalf. This would not affect your ownership of the house in any way.

2. In the unfortunate incident of your demise, your family members will not be hounded by the lending institution for the repayment of balance EMIs. This will be taken care of by the insurance company.

3. The premium you pay for the insurance policy is tax-deductible,e., you can claim it as an expense in your income tax return and need not pay any tax over it.

4. The premium must only be paid until the loan amount is outstanding. If you manage to prepay your loan amount, then you need not pay for the insurance coverage for the remaining period.

5. You can opt for additional riders which would insure your home loan in case of events other than death or disability also. The incremental increase in premium amount would be negated by the extensive benefits available.

It is essential to insure your debt if you want to save your family from the hassles of arranging for such massive amounts themselves. But remember to negotiate with the insurer regarding the policy premium and also avail the necessary riders which will enhance the benefits of the insurance policy.

Also Read: Dealing with the Increasing EMIs of Your Home Loan is Easy with These Tips

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