Buying a home is a dream come true for many people. It is both an emotional and a financial milestone.
If you have a large home loan and are concerned about who will repay it in the event of an unexpected event, it is time to learn more about home loan insurance policies.
If a borrower is unable to repay EMIs due to unforeseen circumstances such as death, accident, or job loss, home loan insurance kicks in. Mortgage insurance, also known as home loan insurance, protects the borrower and ensures loan repayment. Home loan insurance assures that your loan is paid off in any unforeseen circumstances.
What is Home Loan Insurance?
Home loan insurance is also known as a Home Loan Protection Plan (HLPP). If the borrower passes away during the home loan repayment period, the insurer pays the lender the outstanding balance of their home loan.
The policy and loan terms are usually the same. Borrowers who purchase home loan insurance focus on ensuring that their family will not have to repay the home loan or abandon the property if the loan balance is not paid off after their death.
Is insurance compulsory for home loans? It’s not, but it’s strongly recommended.
Why Should You Consider Getting Home Loan Insurance?
There are several reasons why it’s wise to go for home loan insurance.
- Not having insurance exposes you to financial loss in the event of unforeseen events. For example, if you lose your job and are unable to make your monthly payments, you may lose your home if you do not have insurance. Home loan insurance pays out a lump sum that can be used to pay off a current mortgage. The policyholder or the loan recipient receives a lump sum payment.
- Joint home loan borrowers can be covered under a single home loan insurance policy.
- For an additional fee, medical issues, critical illness, or disability can be added to a home loan insurance policy.
- The vast majority of home loan insurance policies are single-premium policies, which require you to pay the premium only once. Most lenders allow you to add the premium to the loan amount. In this manner, the premium is deducted along with the EMI.
- Tax benefit: Home loan insurance provides tax benefits under Section 80 C. Please keep in mind that you will not receive the tax benefit if you add a premium to your loan amount and pay the premium through EMIs.
It’s a Win-Win Situation
For home loans, two types of insurance policies are available: Property insurance and mortgage payment protection.
While the former protects your home from fire, flood, or other perils, the latter helps cover your loan payments in the event of death, job loss, or inability to work due to an accident or illness.
As you can see, home loan insurance protects both the borrower’s and the lender’s interests, making it a win-win situation for both parties.
Purchasing a home is a significant investment. Though home loan insurance is not required to obtain a loan, purchasing it makes sense because it ensures you will not lose your most valuable asset if something unfortunate occurs.