Home loan Insurance

There might be a fear in an individual’s mind that if something unexpected happens to him/ her then who will repay the home loan debt. A borrower will not want his/ her family to pay for the home loan after their untimely demise. These thoughts come to one’s mind especially when it is a long term loan for a maximum of 30 years.Home Loan Insurance is also termed as Home Loan Protection Plan (HLPP) is a scheme offered by reputed financial institutions where the insurer settles the outstanding balance of a home loan debt in case an unforeseen situation occurs and the borrower passes away. Most banks, Like HDFC bank home loan and Non-banking financial companies, or housing finance companies offer the facility of Home Loan Insurance or Home Loan Protection Plan (HLPP). The policy term is generally the same as the loan tenure. A borrower avails the facility of a Home Loan Insurance to ensure that his/ her family does not have to keep paying for a housing loan debt after his/ her demise.

Further, we will look into some features and benefits that fall under the policy of Home Loan Insurance:

• Home loan Insurance comes with a lump sum amount of benefit which can be further used for repaying the home loan debt.
• A lump sum amount is received by the beneficiary of the home loan or to the policyholder, under the scheme of a Home Loan Insurance.
• A borrower is liable to the tax benefits from a home loan under the section of 80C and 80D.
• The policy of Home Loan Insurance could lapse while home loan balance transfer, full repayment of the loan amount, or in case of home loan restructuring.
• If there is a provision of a joint loan, then a Home Loan Insurance covers for all the borrowers.
• With some added premium, serious medical conditions like disability or critical illness can also be covered under this scheme.
• There is the flexibility to the repayment of the premium which can be a single or a whole payment premium or insurance credit. One can adjust the total amount and pay it on an annual basis.
• The borrower is provided with the option of converting the insurance premium into an amount that can be further added to the home loan EMI installment.
• Certain medical conditions, like cancer and heart attacks, etc, come under the coverage of a Home Loan Insurance. Although it might not cover situations like suicide or death due to natural calamities and war.

There are three types of Home Loan Insurance that include Level Plan, Hybrid Plan, and Reducing Cover Plan which is further discussed:

1. Level Cover Plan: Under this scheme of Home Loan Insurance, the loan coverage remains the same for the entire tenure.
2. Hybrid Cover Plan: In this type of Home Loan Insurance there is full coverage during the first year and it starts reducing as the balance amount reduces with the tenure.
3. Reducing Cover Plan: Under this type of Home Loan Insurance scheme, both the coverage and the outstanding loan amount reduces with the tenure.

A borrower can avail of home loan insurance if he/ she has not previously paid for the term insurance. Although, term insurance and home loan insurance cannot be compared with their features and benefits they share the somewhat same purpose and benefits. For borrowers under the debt of a home loan, it is suggested for them to take up a Home Loan Insurance after looking through the terms and conditions of the policy. It will help in assuring you that your family members do not have to keep on paying the home loan repayment if something unforeseen happens and the borrower has an untimely demise. Moreover, the Home loan Insurance scheme claims to settle the loan amount if any unfortunate incident occurs on the family of the borrower. Lastly, it is not mandatory to take up Home Loan Insurance, in every situation. It is mostly recommended in cases where the borrower has a long term repayment tenure.