Insure your home loan for secure future

A home loan insurance should be looked at as instrument that protects familys financial condition.

With the increasing penetration of housing finance,complementary products such as home loan insurance also has gained momentum. By paying a small amount of premium for a home loan insurance policy,the policyholder (home owner) is provided with a cover that would not put the onus of repayment of the loan in case of the policyholder’s death. This insurance policy provides the family with much-needed financial cover,emotional security and peace of mind.

Home loan insurance is nothing but a variation of pure term insurance plan offered by life insurance companies. But unlike a term insurance where the coverage amount is fixed,the coverage in a home loan insurance policy keeps reducing with the decreasing liability of the loan.

There are some popular decreasing term assurance policies to cover home loan repayment provided by life insurance companies. Some examples are: LIC Mortgage Redemption,ICICI Pru Home Assure,Aegon Religare Decreasing Term Plan,Aviva LifeShield Platinum and SBI Life Smart Shield.

Story continues below this ad

Customers have a choice,either to go for a single-premium home loan insurance cover extended by the bank or finance company providing the loan or buy one of the above-mentioned term insurance policies directly.

Very often banks increase the customers loan amount to accommodate the one-time premium of home loan insurance. Although there isnt any major difference in the premiums of both the policy options,many people tend to take it along with the home loan by making the one-time premium payment. The premium depends on the amount of loan,policy tenure,age and health condition of the borrower. A higher age of the borrower or a higher loan amount implies a higher premium and a good medical report of the borrower may help in getting a lesser premium.

A home loan insurance should be looked at as an instrument that protects the familys financial condition and does not jeopardise their future by putting the ownership of house at risk. This has been understood and accepted thoroughly by people in the western nations who are highly leveraged with loans and credit cards. The awareness of such products is at a low level in our country but with increasing communication by insurance companies,banks and financial companies,one soon hopes to see higher acceptability of such protection insurance plans. l

Author is CEO,MyInsuranceClub.com