Risk Cover for your Home Loan
Taking an insurance policy on a Home Loan is not a compulsion, however if there’s an emergency and the borrower is not present, or is unable to pay the EMIs, the insurance policy comes to the rescue. So, it’ll act as a cover for you and your family, through thick and thin. But there’re certain things that you need to be aware of, if you want to insure your Home Loan.
Insurance Cover for Home Loan
There are certain factors that will affect your Home Loan premium, some of which are listed below:
A Home Loan insurance covers the outstanding loan amount that will be paid to the bank or NBFC in the event of your death. Therefore, insurers will want to make sure that you’re not suffering from chronic health diseases and will be able to repay your loan under normal circumstances.
Generally, Home Loan insurance providers might be reluctant to provide a cover if you’re nearing your retirement age (60 to 65 years). If they do offer their services, you might have to shell out higher premiums than you would have had to at the beginning of your career.
Your income is an indication of whether or not you’ll be able to repay the Home Loan amount and the premiums. If insurers find you incapable of paying Home Loan EMIs, they will automatically assume that you won’t be able to pay premiums as well.
Tenure of the Home Loan
Your Home Loan tenure will play a significant role in determining the insurance premium amounts. Irrespective of the insurance cover amount, a higher tenure will result in higher premiums.
How to Calculate the Amount for Home Loan Insurance?
A Home Loan insurance policy covers the outstanding amount of your loan. The amount will keep coming down as you repay your EMIs. If you’re successful in repaying the Home Loan all by yourself, the insurance payout will be given to you.
Eligibility Criteria for Buying a Home Loan Insurance
Anyone above the age of 18 can buy a Home Loan insurance policy. However, most insurers would be reluctant to offer a insurance policy to people above the age of 50. But, if you can prove that you’re in the pink of your health, you’ll be able to buy a policy quite easily.
In the event of the death of the policyholder, a family member (the beneficiary) can claim the insurance amount. If the claim is passed, then the insurer will give the money to the lender. However, if the policyholder is alive after the expiry of the policy term, they will not receive the premiums paid.
Benefits of Home Loan Insurance
- Your property will not be foreclosed by the bank or NBFC when you’re no longer around
- Your family doesn’t have to worry about repaying the Home Loan as it will be taken care of by the insurer
- Your future, and that of your family’s, can be secured with a Home Loan insurance policy
Types of Home Loan Insurance Plans
There are two types of Home Loan insurance plans and they are:
Home Loan Protection Plans (HLPP)
You can buy this insurance cover when you’re availing a Home Loan. A pre-determined sum acts as the cover, which decreases as you repay the loan amount.
If you take a Term Plan, the entire cover amount will be given to you after you have repaid the loan and the end of the insurance policy term. This can act as savings for your family.
How to Buy an Insurance for Home Loan
Usually, the lender will provide you with the appropriate insurance policy that suits your requirements. That being said, you will need to look out for certain important factors while considering a Home Loan insurance policy. The most important thing to check is whether the policy will offer death benefits or death by accident features. Make sure the policy has a permanent disability benefit or not. This will ensure your family does not face any problems later, if you are incapacitated. Also, you need to know how the benefits of the policy can be claimed beforehand.
Rate of Interest On Home Loans
In the present day, commodity prices have seen as drastic hike, which has also affected the Home Loan interest rates in India. Since the interest rate is also a factor in deciding the premium for insurance cover, you need to take that into consideration. Bajaj Finserv offers Home Loans on interest rates that start from as low as 9.50%.
Ideally, you should always take an insurance cover for the Home Loan you are acquiring. This not only keeps you secure during times when you are low on cash but also ensures that you are not fined for non-payment of EMIs. Take your time, analyse the various factors involved, and choose an insurance policy that works for you.