Types of Insurance Cover for a Home Loan

 Types of Insurance Cover for a Home Loan

 Ensures that in case of failure to repay the loan, the insurer will pay the loan on your behalf.  In that case, the home loan in your absence will not burden your family members at the time of financial crisis.  Note that, a home loan is a secured loan that entitles the lender to take over the mortgaged property in the event of its inability to pay the loan.  However, with home loan insurance, you will not lose the ownership of the house even if you fail to repay it.

 There are three types of insurance cover for home loans, level cover plan, hybrid cover plan and reducing cover plan.  These three types vary based on insurance coverage, as explained below:

 The Level Cover plan: It is a basic insurance plan in which the premium paid for the home loan insurance and coverage remains the same throughout the tenure.

 The Hybrid Cover plan: According to this home loan insurance plan, the coverage remains full for the first year then the balance amount reduces with the tenure.

 The Reducing Cover plan: In case of reducing cover plan, the loan balance and coverage gets reduced over time, the coverage gets reduced when the tenure is about to end.

 What are the Salient Features of Home Loan Insurance Schemes?

 It is advisable to know the features of home loan insurance plans before opting for one.  These are listed below:

 One-time payment: There is only a one-time premium amount to be paid and there are no multiple premium requirements on insurance for a home loan.  However, the home loan insurance premium is paid as per the EMI.  Thus, the premium amount is disbursed in monthly payments, just like the principal loan amount.

 Implications on Balance Transfers: In case of home loan balance transfer, the implications of home loan insurance may change.  Sometimes the new lender may insist on a different home loan protection plan or may be comfortable with the previous one.  Also, home loan insurance may expire with balance transfer, and the insurer may ask you to restart the insurance plans.  Thus, in case of balance transfer, one must ensure to restructure home loan insurance plans.

 Covers Joint Home Loan Borrowers: In case of Joint Home Loan, the home loan insurance is not limited to any particular individual.  Actually, in case of joint loan, the insurance coverage is applicable to all the co-applicants.

 Who this Average Home Loan processing time?

 Life Insurance

 What Are The Main Benefits Of Home Loan Protection Plans?

 There are multiple benefits associated with home loan protection plans.  These include:

 Security coverer: The major advantage associated with an insurance cover for a home loan is that it provides security coverage to both the lender and the borrower.  While the lender is protected from loss, you are spared a huge liability in times of financial crunch.

 Tax benefits: The premium paid on home loan insurance provides borrowers with the same tax benefits as a home loan.  However, you can avail tax benefits under Section 80(c) and 80(d) of the IT Act.

 Convenience and flexibility: Home loan insurance premiums are generally charged at higher prices.  However, to make it easier for you, lenders, most of the time, combine the premium amount with the regular EMI.  Thus, just like the principal amount borrowed, the premium is also paid in installments, which makes it convenient for home loan borrowers.

 Inclusive to Add-ons: Housing loan insurance policies are very inclusive in nature when it comes to enhancing cover benefits.  For example, home loan insurance provides coverage for various plans that include illness, sudden death or unemployment.  However, suicides are not covered under home loan insurance plans.  Additional benefits can be availed by opting for term insurance for home loan.

 Difference between Housing Loan Insurance and Home Insurance

 Home loan insurance is different from home insurance.  The following table lists out the differences between the two.

 Home Loan InsuranceHome InsuranceHome loan insurance can be bought only when you have an ongoing home loan or is applying for a new housing loan

.Regular home insurance can be bought anytime as long as you own a house.Home loan insurance lasts until the end of the  loan tenure.Home insurance ends when the opted tenure ends.  

It can be opted for up to 30 years.A home loan insurance helps you repay your loan amount in case of his or her inability to do so.

Home insurance provides coverage to your house if any damage occurs like that of thefts, fire, floods  , burglaries, etc.Examples of home loan insurance: HDFC Life Home Loan Protection Plan, SBI Life Saral Shield, etc.Examples of Home insurance: HDFC Ergo, Bajaj Allianz, SBI Long Term Home Insurance Policy, etc.