Home Loan Insurance Plan Comparison and Benefits

What is Home Loan Insurance Plan or Home Loan Protection Plan?

The primary objective of availing home loan insurance plan is to help the insurer or the home loan borrower settle the outstanding home loan amount in case of unforeseen circumstances. Home Loan Insurance Plan is usually known as Home Loan Protection Plan.

Your home is your private sanctuary and definitely, you would want it to be safe and secure. Buying a house is a major investment that one makes in their life. Moreover, you would also agree with the fact that most of the people take a home loan to buy their dream home. But, it is important to repay this home loan on time irrespective of your financial crisis. What if there are circumstances which forbid you from making the payment, it can be your sudden death as well. Home loan insurance or Home loan protection plan comes into picture then.  Home loan insurance plans are popular products nowadays but offer limited benefits. Remember, a trustworthy home loan insurance protects not only your home but also your memories associated with the home.

Some of the home loan protection plans also provide home loan insurance plans that cover the applicant, house, and all its components. The premium which is paid towards home loan insurance is applicable for tax benefits.

Why do you need home loan insurance and what does it cover?

Well, buying a home is not easy, it involves a considerable amount of investment, and thus there is a need to keep this insurance safe. Nobody would want to pass on the liability to their next generation in case of some unforeseen circumstances. In these situations, home loan insurance comes as a boon.

  1. Home loan insurance plan or home loan protection plan not only protects you from the sudden burden of EMIs but at the same time, it also has tax benefits under section 80(c).
  2. Some lenders cover the home loan borrowers’ home loan outstanding amount as well as illness. You can choose such home loan protection plan products which cover both.
  3. No need of term insurance plan if you opt for home loan protection plan which has benefits to cover your illness expenses and home loan outstanding amount.
  4. You can get your dependants also insured by opting the HLPP.
  5. Some HLPP products cover your home loan, home, contents of the home, illness of the borrower, and dependants. Though the premium you need to pay is a bit higher, you get everything under one roof. Then why pay for different policies in different companies.
  6. You have to pay in single premium. If you cannot pay, the premium is added to your principal loan amount through which you will not know the burden of the premium.
  7. The best of all, when you witch your lender, your home loan protection plan still continues with your new lender. Ensure that it happens.
    If you have taken the home loan, it doesn’t necessarily mean that it’s an end of the financial burden, in case of an eventuality, the load might just come on the family members and hence, it is suggested to go ahead with home loan insurance.

Actually, the term insurance is the much recommended product when you are in home loan and when you want insurance. But, now-a-days, every home loan lender makes it mandatory to take insurance while disbursing the loan amount. Yes, there is a chance as well as choice for not opting for the home loan protection plan by the lender itself, but only if you have insurance premium paid in other company and if it covers your home loan too.

Or choose a bank whose product has home loan amount cover, life cover, illness cover, contents of the house cover. At the same time, the interest of your loan should be low and also the premium should be competitive. If not, it is better to go for a term insurance which can cover everything (for e.g., ICICI Bank). Loanyantra helps you to figure out what  is best in every step. You can enquire from our experts whether you have a product matching your requirement. You can choose from the bazaar of prevailing bank opportunities through Loanyantra.

When can you go for a term insurance instead of home loan insurance ?

The first and foremost thing to compare is premium to be paid and how many times to be paid and what all covered. It’s one of the cheapest form of life insures which is meant to protect the entire family. It also provides better life cover and that too at a lower cost. So, if you have taken a home loan, it is advisable that you must go for term insurance cover.

How does the term insurance help you?

The first and foremost benefit of term insurance is that it reduces risk. The term insurance plans claim that it will help in meeting the home loan liability in case the borrower dies.

Key Features of Term Insurance-
1. Home Loan Insurance is Affordable- One would never want to shed down their burden on the family members, so, if you have taken a home loan, most of the insurance providers would suggest you avail term insurance. As mentioned above, it is highly affordable and will cover up the cost of the outstanding amount in case of the death of the borrower. You should compare the premium of different companies go for the one which is affordable and easy on your pocket.
2. Change lenders with term plans– It gives you an added benefit of changing the lender without any need to relinquish the insurance premium. For example, you have taken home loan with a bank and you have opted for home loan insurance, after some years, if you wish to transfer your home loan to another bank or lender, your home loan insurance plan will automatically continue and cover the remaining outstanding amount in whichever bank you stay with.
3. Term insurance comes with significant benefits- Apart from being an affordable plan, term insurance provides the nominee full amount irrespective of the time when the claim is made. The nominee can use this amount to settle the outstanding home loan amount. You have the flexibility to choose the period of payment of premium, i.e., you can decide whether it is going o half-yearly, yearly or monthly. Additionally, this insurance also gives you the tax benefit under Section 80C and 80D

Comparative Table of the Popular Term Insurance Plans

Insurance Providers Plan Maximum Maturity Min-Sum Assured Claim Settlement Premium (for coverage up to one crore)
MAX Online term Plus one time lump sum plan 70 years 25 lac 97% Rs. 1073 per month
Ageon Religare iTerm 100 years 25 lac 97% 1286 per month
SBI Poorna Suraksha 60 years NA 96% 2255 per month

IDBI IDBI Federal iSurance Lump Sum Plan 80 years 30 lac 95% 1509 per month
SBI eShield 60 years NA 96% 904 per month
HSBC iSelect Lump Sum 70 years 25 lac 94% 854 per month
TATA AIA Tata Sampoorna Suraksha Lump Sum 70 years 50 lac 96% 865 per month
KOTAK e-term 75 years 25lac 91% 872 per month

 

Why should you not compromise on term insurance?

You would notice that some of the insurance companies would suggest you buy Home Loan Protection plan but it’s always better to go with Term Insurance as these places are more affordable, easy to avail and also comes with series of events, here are few of them :

Loan Protection: The most important aspect of Term insurance is that it protects your family in your absence. The nominee gets the entire amount and can payout the pending home loan amount from the same. In case the money is left, the nominee can keep the whole amount.

Health Protection: This insurance plan gives you the benefit of both life and health insurance. You should contact the insurance provider to discuss the health insurance and diseases it covers as it may vary from one company to another

Saving & Control: Lastly, if you wish you can also continue this plan after repayment of the home loan to protect your family from unforeseen circumstances.

Home Loan Insurance Vs Term Insurance

Premium Payment –

Home Loan Protection Plan Premium payment is a single payment and the premium can be included in loan amount if you cannot afford for the premium.

Term Insurance Plans have payment plans either monthly or quarterly or half yearly or even annually.

Insurance Cover

Home loan protection plans by the home loan lenders like SBI mainly cover the outstanding loan amount.

Term insurance plans can cover loan amount, illness, home, contents of the home.

Value for Money –

Home Loan Protection Plan is surely a good option when you have a premium calculated according to your loan. And guided well.

Term insurance is a must whether you have a home loan or no. Though you pay many premiums according to the plans, the return is very much correct when you get into risk.

No. of people covered

Home loan insurance plan covers the applicant, co-applicant as well.

Term insurance covers only the applicant.

Loanyantra guides you and helps you choose the right home loan and  insurance plan. However, our role is not merely restricted to a selection of insurance plan we also help you decide which plan is better and suitable for. Loanyantra also helps you find the cheapest home loan options and also take care of the complete paperwork to make you task easy and hassle-free.

NOTE – Home loan protection plans are a mandatory now irrespective of where you take loan. 

Ask yourself – 5 Questions about Home Loan Insurance.

Q1. What is home loan insurance? Is home loan insurance and house insurance same?

Home Loan insurance or insurance on home loan supports your family in any unforeseen event by paying the outstanding loan amount. Home loan insurance is an insurance term plan provided on your home loan amount for the same tenure like your home loan. Now in India, home loan insurance is made compulsory by all the lenders while opting for the home loan. Team Loanyantra can suggest you the loan products with low home loan interest rate as well as  home loan insurance low premium products.

Before that we should know that house insurance is totally different from home loan insurance. With regard to home loan insurance, you get the home loan insured whereas with house insurance, you get the structure of the house and the contents of the house insured.

Q2. How does Home loan insurance work? Will the home loan insurance cover reduces over the home loan tenure?

“A loan insurance plan covers the balance to be paid in case of the borrower’s death as per the loan schedule decided at the time of taking the policy,” says Rituraj Bhattacharya of Bajaj Allianz Life Insurance.

The home loan insurance offered by the loan cover will progressively come down as the home loan gets repaid. For instance, by the 10th year, if the loan cover would have been to be Rs 13.5 lakh. By the 14th year, it would have been reduced to about Rs 3.5 lakh.

Q3. How to pay the home loan insurance premium ?

To calculate the home loan insurance premium, primarily, the home loan interest rate is taken into account. A few companies or financial lenders also have a different rate for metropolitan and non-metro areas.

The other factors considered are, the age and medical record of the policy holder, the loan amount and the repayment period. The larger the loan amount or the repayment period, the higher the premium.

The home loan insurance premium payment can be paid at once or annually. You can either choose, 3,4,5,7 or 10 year, not exceeding 2/3rd of the loan term. For example, if you have to pay a premium of Rs.50,000 and choose to pay annually,  the bank includes that premium into your loan amount and calculates the EMI. So be wise and diversify your funds.

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Q4. What are the tax benefits while paying the home loan insurance premium ?

Only, if the premium is paid by you, and not by the lender, you are eligible for tax deduction under Section 80C and Section 10(10D).

If it has been paid by the lender and is part of the loan which you will repay through EMIs, it will not be possible to claim deduction.

Infact, the tax benefit is very negligible. The tax limit is Rs. 1,50,000. So, when you choose to pay annually, the premium is spread across your tenure which is added in your EMI. Understand that you don’t lose much.

Q5. What are the other options to insure your home loan? 

Usually home loan insurance is compared with insurance term plans. The main advantage with term plans is they cover other financial needs along with the home loan. However, whether you opt for a home loan insurance or choose any other term insurance plan, the premium is calculated accordingly, which can be higher for higher cover.

But now in India, it is mandatory to opt for the insurance for any loan you take. So, you can only opt whether you pay the premium directly or pay the premium through EMIs. 

NOTE :  Why should you opt for Home loan insurance?

The solution lies with you. But, the best advantage with home loan insurance is, incase of unexpected happening to the borrower, the insurers go to the bank directly to close the loan. The family need not go around the banks or insurance companies. So, for those whose family does not have much exposure about these financial matters, it is a good decision by the lenders to make it mandatory. So, plan smart and choose the best fit.