Nowadays, home loan insurance is gaining popularity as banks and financial institutions have started pitching home loans with their home loan protection plans. But have you ever wondered why these home loan insurance policies are required? If not, here is a comprehensive guide to everything from what home loan insurance is to how to get it and reap its benefits. We bring you the answers to the top 5 most frequently asked questions that can help you decide if you should buy a home loan insurance plan with your home loan.
What is home loan insurance?
Home loan insurance or home loan protection is like term insurance that guarantees your home loan repayment even in unforeseen circumstances, including the demise of the home loan EMI payee. It compensates for your home loan in your absence and saves your assets from getting seized by the bank, thereby ensuring repayment of your home loan EMIs. Some banks and financial institutions have also mandated to buy home loan insurance with each home loan they purchase. However, there is no directive to buy a home with its insurance, while it is always advisable to purchase a home loan insurance policy with a home loan. It is important to note that the loan protection plan remains active until your outstanding home loan amount is repaid.
Why is home loan insurance important to buyers as well as lenders?
Home loan insurance is a dual-profitable policy that helps buyers repay their home loan in any circumstance, saving lenders from bearing any losses. It ensures the lender a guaranteed repayment of the home loan. The purchase of a loan protection plan is uncommon, while it is advised to purchase a home loan insurance policy along with your home loan to safeguard your family and precious assets. As a result, having a home loan insurance policy is a win-win situation for both the lender and the buyer.
How to avail of home loan insurance?
Home loan insurance is usually purchased while securing a home loan from a bank or other financial institution. Many sell it as a package combining both a home loan and a loan protection plan. However, buying home loan insurance as a package is not mandatory. You have the liberty to choose your home loan insurance, which means you are neither bound to purchase it nor restricted to buying it from the same lender. Hence, it is important to do your homework before picking up any loan insurance plan in order to get the best deal that meets your requirements.
How does home loan insurance work?
The home loan insurance works in tandem with the home loan. It comes to your rescue when you are in a critical situation, such as losing your job or the demise of the house loan payee. This loan protection plan makes sure that you repay the home loan and get all your assets and collateral handed over by the bank or financial institution. Home loan protection schemes usually offer a one-time premium payment option. However, buyers have the choice to club the premium amount with the total loan amount. In this arrangement, the home loan and its insurance EMI are deducted together by the lender as a total amount against two different policies.
Are there any additional benefits?
Yes, there are numerous benefits available with the home loan insurance schemes that provide optional rider plans, including critical illness, unemployment, disability, or accidental death, which can be combined with home loan protection plans. These numerous add-on benefits assist you in protecting your family from the financial crisis in case of an emergency.
Buying a good loan insurance plan is always a better choice as it prioritises your home and family by securing them from getting affected by any financial crisis. Now that you know what home loan insurance is, you must also know the Top 5 benefits of home loan insurance to get a better understanding in detail of why a loan insurance plan is important.