Explained: Banks pushing fire insurance, but very few still opt for cover

However, several banks have now begun asking their home loan customers to buy fire insurance too. Borrowers have reported that lenders often strongly encourage, or even insist, that the policy be bought from the bank’s own insurance subsidiary or a partner company. The bundling of fire cover with home loans has become more pronounced over the past few years, insurance officials say.

A senior bank official said this reflects the growing focus on risk mitigation as well as the search for an additional revenue stream by lenders through the cross-selling of financial products. From the banks’ perspective, insisting on fire insurance also helps protect the underlying asset – the property – which serves as collateral for the loan.

Data from the General Insurance Council, the representative body of general insurers, show that the gross premium underwritten under fire insurance rose by more than 13% to Rs 27,523 crore in 2025-26, reflecting a steady growth in demand.

While buying fire insurance bundled with their home loan, borrowers should carefully review policy terms, compare options across insurers, and ensure that their purchase decisions are based on informed choice rather than compulsion, experts say.

The General Insurance Council says on its website that “buying a fire insurance policy brings customers peace of mind as it covers them for losses or damage resulting from a fire and other covered events/ perils.”

However, points such as perils covered, exclusions, add-on covers, and adequacy of sum insured should be considered while buying fire insurance, the Council says.