Summary of this article
Home loan insurance works on a straightforward concept. If the borrower passes away during the tenure of his home loan, the insurance policy covers the outstanding home loan amount and helps the family from any kind of financial burden.
You need to understand how much money you will be paying as a premium if you choose to get a home loan insurance. It is an additional cost you are being charged over your home loan.
Always read the terms and conditions of the insurance policy you are opting for. Know it in and out, including the exceptions.
Home buying is often considered a financial landmark because securing funds, completing due diligence and purchasing a home loan are tasks that require a lot of patience. Borrowers looking for a home loan are often offered home loan insurance by banks, whether as an add-on option or a mandatory requirement. So, should you really buy it?
Home loan insurance, also popularly known as mortgage insurance or a home loan protection plan, is helpful in securing your family financially if something unfortunate happens to you during the home loan tenure. The main objective of this insurance is to cover the outstanding home loan amount.
Let’s understand the various facets of home loan insurance, which will aid you in making the decision.
Know About Insurance
Home loan insurance works on a straightforward concept. If the borrower passes away during the tenure of his home loan, the insurance policy covers the outstanding home loan amount and helps the family avoid any kind of financial burden. It ensures that the house is in your family’s name and there is no chance of your house getting seized because you couldn’t pay the EMIs.
Reasons To Get Home Loan Insurance
Life is full of uncertainties. You can never say what can happen tomorrow. Home loan insurance is meant to provide financial cover to your family. If you are protected by a home loan insurance cover, your family can live in your house without any fear of mortgages. There are higher chances of unforeseen circumstances happening, such as if the borrower dies at a younger age. Having a home loan insurance cover will protect you from such risks.
The outstanding home loan amount gets cleared, and your family continues to own the house. This provided them with a sense of security during hard times.
Things To Keep In Mind
Premium amount: You need to understand how much money you will be paying as a premium if you choose to get a home loan insurance. It is an additional cost you are being charged over your home loan. So, compare the plans and get the insurance which suits your budget.
You already have life insurance: If you already have a high life insurance cover, you might want to rethink if you really need home loan insurance. Compare the home loan amount which will be left after your death and judge if you need home loan insurance or not.
Terms and conditions: Always read the terms and conditions of the insurance policy you are opting for. Know it in and out, including the exceptions.
Think twice if…
Loan tenure is short: If you have chosen a short tenure to repay your home loan, the outstanding amount won’t be much. So, you need not worry about getting a home loan insurance.
You have savings: If you have enough savings which can pay off the home loan amount left after you are no more, then you can skip buying the home loan insurance.
Your health: Another thing to consider is your health. If you are extremely healthy and the chances of you dying at a young age are slim, then home loan insurance might not be necessary for you.
Financial experts say the decision to buy insurance is very personal to an individual. It all boils down to your situation, your finances and your risk appetite. Home loan insurance provides you with peace of mind, and keeps your house and family financially protected.
However, don’t make any hurried decision. Evaluate your finances properly and understand the insurance policy that you are opting for.
