Insurance

Difference between Home Insurance and Home Loan Insurance

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With time, each one of us dreams of owning a house of our own. Although it sounds easy enough, investing in a dream house involves tremendous effort, savings, hard-work and patience. In the long-run, even if you own invest in a dream house, the hustle does not end there. Securing the house is highly suggested for all homeowners. Considering this, most individuals opt for home insurance policies.

In most cases, homeowners take loan insurance plans from reputed financial institutions or banks. This way, they can afford to maintain their space without compromising on essential expenses. However, people tend to get highly confused between the two terms: Home loan insurance and home insurance. To eliminate this confusion, here is a brief section discussing the concept and benefits of the same. Let’s begin.

What is Home Insurance?

Typically, an ideal home insurance policy/plan safeguards the home and its content from all the unusual and unseen loss or damage. With home insurance, one can protect their valuables and houses that may occur due to man-made/natural calamities, theft, etc.

To speak about house insurance a little more, the policy offers two covers: content damage cover and structural damage cover. While content damage cover provides financial support for damage/loss of the content of the property (damage to appliances, furniture) structural damage covers make sure that the financial assistance is offered only if the structure of the property is damaged.

Furthermore, the good news is that home insurance can be bought by both the house owner and the tenant. However, note that the tenants will receive content damage cover only. This is because they are not the owner of the space.

Benefits of Home Insurance

Some of the benefits that home insurance offers include:

1. All-around protection

Home insurance allows you to safeguard your humble abode. Be it natural disasters or man-made ones, you will be able to protect your home from all possible dangers.

2. Part of The Home Loan

Very often, home insurance plans are sold as a very part of home loans. For example, opting for a home loan from any public lender will provide you a home protection plan as a vital part of the deal.

3. Cost-Efficient

Home insurance plans are an affordable way to protect the contents of your house. They offer substantial protection at pocket-friendly premiums.

What is Home Loan Insurance?

An ideal home loan insurance policy covers all the liabilities of the home loan. This takes place when the borrower fails to pay the loan due to unusual adversities. It denotes that the monthly home loan installments are paid when the borrower fails/is unable to pay the same.

However, home loan insurance covers may vary from provider to provider. Several insurers cover the cost of repaying the loan in case the homeowner/borrower suddenly passes away. Similarly, some insurers cover the loan when borrowers suffer from critical illnesses, lose a job, or get disabled. Needless to say, ensure going through the terms and conditions of the insurance policy to be aware of the components right from the beginning.

Moving forward, a home loan insurance policy is perfect for individuals that have mere savings but wish to purchase a property/house at an early stage of life. This is because the loan repayment is guaranteed by the insurer. The home loan policy comes with any option to repay the loan in single payment or multiple installments at regular intervals.

A good part of the home loan insurance policy is, banks cannot deny a home loan to a borrower under the insurance regulator IRDAI just because they refuse to take a package deal. In case you are planning to prepay the loan in a very short period, purchasing a home loan cover might not be ideal. However, if you’re taking the loan for a longer period, purchasing this home loan cover is a must.

Benefits of Home Loan Insurance:

Some of the benefits that home loan insurances provide are:

1. It understands your requirements. Generally, these are third-party products. Hence, banks add it in their packages of home loan plans. Sometimes, banks hard sell it as well.

2. The home loan insurance plan helps the owner to retain ownership of the property even in case the EMIs are not paid duly.

3. Home Loan Insurance protects you in certain/unexpected circumstances where you may find it difficult to afford the loan.

4. This plan acts as a relief to the family. Furthermore, it pays off the rest of the home loan amount in cases of adversity.

5. Premiums paid for home loan insurance are entitled to tax deduction under the Income Tax Act (Section 80C).

Home Loan Insurance Vs Home Insurance:

Tabulated below is a list of key differences among home loan insurance and home insurance for a clear picture

Home InsuranceParametersHome Loan Insurance
Individuals can purchase it irrespective of the existence of a home loan InsuranceAvailabilityIndividuals can attain it only if a home insurance is available
Comparatively, home insurance charges a lower premiumPremiumHome Loan Insurance charges a higher premium
Zero impact on the down payment factorDown PaymentEnables lowering the down payment of the property due to the tax entitlement

Conclusion

Upon conclusion, it is important to note that both the terms are varying yet crucial. While home insurance plans safeguards individuals against all monetary losses incurred due to damage/loss of the structure and content of the property, home loan insurances restrain the bank/ financial institution from selling the property in case the homeowner fails to pay the home loan. The major takeaway here is that purchasing a HOME INSURANCE policy will help you cut down all financial stress while taking home loan insurance helps if you are planning to take a home loan.

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