When the borrower takes the home loan, there is no assurance that they would stay around to pay back the entire amount soon. What if something unforeseen happens to you? Who will pay the remaining loan amount? You do not want the burden to fall on your family due to your untimely demise. Home loans usually come with a 15-year tenure. Therefore, it is sensible for borrowers to plan their finances as per the stipulated time frame.
Your concerns can take a back seat as some banks, and non-banking financial companies (NBFCs) offer a plan called home loan insurance. Although it is not mandatory to take one up, almost every lender offers this scheme.
What is a home loan insurance plan?
A home insurance plan, also known as Home Loan Protection Plan (HLPP), allows the insurer to settle the remaining housing loan amount of the borrower with the lender, in case of unexpected circumstances.
By claiming the home loan insurance plan, you are assured that your family does not have to settle the amount with the lender after your untimely death.
What are the features and benefits of the home loan insurance plan?
The home loan insurance schemes come with a host of features and benefits:
- The insurance provides lump sum amount benefit to repay the outstanding due in the future
- Your plan could lapse if you transfer the home loan, restructure the loan or make full repayment of the loan
- The balance amount is given to the borrower or the policyholder
- You get a tax benefit by taking up home loan insurance plan under Section 80C & 80D
- If you hold a joint housing loan, a single home loan insurance can cover all the borrowers
- With the extra premium, you are guaranteed to receive coverage for medical conditions like disability and critical illnesses such as heart attack, cancer and many more
- You can also convert your insurance premium into home loan EMIs
- A home loan insurance does not cover the death of the person under natural reason
What are the types of home loan insurance?
Lenders offer three kinds of home loan insurance:
- Level cover plan: The coverage remains the same for the insured throughout the loan tenure
- Hybrid cover plan: The coverage is full in the first year, but reduces as the outstanding amount comes down with the mandate
- Reducing cover plan: The coverage, as well as the balance amount, reduces with the tenure
So, the above pointers guide you as to why you should opt for home loan insurance along with your housing loan. It appeases you and your family from any unfortunate happening in the future.