Buying a house is one of the major dreams of many people. But, because of the prevailing conditions and economic instability, buying a home of one’s choice is not an easy task. Importantly, it is more difficult for people with familial responsibilities. Buying a house and paying the cash upfront is not feasible at all. Moreover, it is also not a wise decision. Under such a prevailing situation, home loans play a crucial role.
One of the popular choices for many is to buy a home by taking out a home loan from a bank or a financial institution. However, people are doubtful whether to buy home insurance simultaneously with a housing loan.
It is not mandatory to buy home insurance along with a housing loan. To buy home insurance or otherwise is purely one’s choice. Nobody should apply pressure on someone to buy home insurance.
However, the grantor of the housing loan may ask the loanee to also go in for house insurance. But there is no hard-and-fast rule that the loanee should also go in for a house loan. But, in such a scenario, the creditor may refuse to advance a housing loan as the creditor is likely to suffer losses in the event of the death of the loanee or damage to the property due to natural calamities or other unexpected events. Therefore, some of the creditors may ask the loanee to go for home insurance, paying a single premium. However, it would put no additional burden on the customers.
Home loan insurance
Existing home loan product users wishing to avail themselves of home insurance can buy home insurance. This provides insurance to the policyholders against losses due to unforeseen accidents. It offers insurance coverage to policyholders on a par with single-premium home insurance products. Here, the policyholders should pay a premium like other insurance plans.
Single-premium home insurance plans
Instead of paying the EMI and home insurance premium separately, the buyers of the home insurance can pay the EMI and premium simultaneously.
For example, a 32-year-old software engineer called Kishore availed himself of a home loan of Rs 30 lakh with a tenure of 15 years. To get insurance coverage for the total loan amount, Kishore would have to pay Rs 49,500 for 15 years at a rate of Rs 3,300 per annum towards the premium. However, those who opted for a single premium would have to pay only Rs 38,000. The amount would be credited to your home loan amount. As a result, the EMI amount would increase to such an extent that remitting the premium for insurance would pose no burden at all. However, there are some disadvantages to it. One of them would be the inability to change the insurance provider until the loan is fully cleared. Under the plan, there would be no maturity benefits for the policyholder. As the loan amount decreases, the insurance coverage will also decrease. Upon clearing the loan, the home insurance policy will lapse.
Term insurance
In case the home loan beneficiary does not like the home insurance, he or she can choose the option of term insurance. The insurance cover will help the nominee clear the home loan upon the death of the insured. What is important is to note that getting home insurance along with a home loan is not compulsory. In spite of it, it is advisable to buy the home loan to overcome the unforeseen losses. Moreover, the home insurance policyholder would be able to access tax benefits up to Rs 1.5 lakh.
Another important aspect is to clearly understand the differences between home loan insurance and home insurance.
In the event of the death of the home loan insurance policyholder or damage caused to the home, home insurance would be useful. However, home insurance coverage works differently. This is also known as property insurance. It does not cover a home loan but only the property. It provides immunity from natural calamities and thefts.
