Importance of home loan insurance policy and benefits

Importance of home loan insurance policy and benefits

Who does not want your home? Everyone living in a rented house is suppressed somewhere in the mind that they wish! They would have a house that they could decorate accordingly to their requirements. However, it is now almost impossible for any person to take home without a home loan because of the house's high prices. Home loans are a huge financial liability, so in this article, I want to discuss why we should buy a separate insurance policy to cover our home loan liability and how you can buy it.

Why life insurance policy is required to cover home loan:

If you have taken a home loan, a large part of your salary will be in the form of EMI. God does not do it, but if something happens to a person earning income through a job or business, it will be almost impossible for his family to repay the home loan installment. The basic principle of financial planning is that any person should buy life insurance to cover all their financial liabilities. When you take a home loan, a new financial liability arises. Taking an insurance policy to cover a home loan will give you a legacy home to future generations, not loan liability.

Let me clarify here that the life insurance policy that I am talking about should be other than regular life insurance.

How to buy this policy: 

Don't look at another plan to buy insurance. You only buy a term plan. This is because the term plan gets more coverage at a lower premium. Now you will want to know where the term plan can be purchased. I believe that if you are a tech-savvy, you should buy a term plan online because the online term plan is 25-30% cheaper. There is no difference between the product. The duration of your term plan should be equal to the loan tenure.

The thing to keep in mind here is that banks usually ask you to buy a single premium term plan policy. These term plans are specially designed for home loans and are linked with premium home loans of insurance. Banks recover the amount of premium through an increase in your EMIs.  However, I would recommend taking a policy with an annual premium payment instead of a single premium policy. This is because, in most cases, people who take home loans do not run their home loans for the entire period and repay the loan in the middle of the fund. In such a situation, the premium already deposited under the single premium policy goes waste as the financial liability that was taken to cover the loan is already complete.

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