Have you ever heard of the term ‘home loan insurance plan’? It is a type of insurance plan that gives protection to the borrower to repay the home loan amount despite any uncertainties like death, major illness, job instability etc. These insurance plans offer you a cover that decreases every year as the loan amount reduces. Should any of the covered uncertainties occur, the insurance company will settle the outstanding loan amount on your behalf.
How will an insurance cover benefit you if you have a home loan?
It is not mandatory to get home loan insurance plans. But you may consider getting one while taking a home loan because of the benefits that it provides to you and your family.
- Security for the family:
Home loans are long-term liabilities, stretching to 20 years or more. Insurance covers secure your family in the event of unfortunate events, for instance, sudden death. Your family would be liable to repay the outstanding home loan amount in such circumstances. But with a home loan insurance cover, the insurance company would take care of it.
- Protection for your assets and collateral:
In the event of your untimely death, if your family cannot repay the outstanding home loan amount in time, the ownership of the home and other property may have to be forfeited. Here insurance cover can be a savior for your assets and other collateral. It would ensure your family members do not have to compromise their living standard or property ownership even if they face financial instability in your absence.
- Protects in case of job instability:
Another instance where this cover would be helpful is if you lose your job. It would take time to find another source of income, but your EMIs would not be put on hold. In such critical situations, this type of insurance benefits you by paying the outstanding home loan amount. There may be a limit on the number of EMIs that are covered by the home loan insurance in case of joblessness. Hence, Its very important to calculate your EMIs using home loan EMI calculator.
- Tax benefit and peace of mind:
Under 80C of the Income Tax Act 1961, you can also get tax deductions on the premium you are paying for the insurance cover. Therefore, the premium expense ends up saving a portion of your tax liability as well.
- Availability of add-on coverages or riders:
In case you succumb to a severe illness or any kind of disability, you can opt for add-on coverage or a disability rider or critical illness rider that would help cover the outstanding home loan amount.
As per your requirement, you can choose a home loan insurance plan for your complete peace of mind. Of course, as with any other financial instrument, it is essential that you get as much knowledge as you can regarding this insurance cover and do your research before making a decision to buy the cover.