Real estate has been the option of choice for the Indians for long, when it comes to investment. However, with the exponentially increasing prices, buying real estate has become a costly affair these days.
Home loan EMI has a significant bearing on one’s financial plans. In-case of any unfortunate incident claiming the life of the borrower, the finances of the company may go completely haywire.
On the other hand, it’s also a risk to the lender as their cash flows will be negatively impacted if the home loan borrower or his family is unable to repay the loan EMI’s on a timely basis. Auctioning the property is an extreme option, even for the lenders. To avoid these kind of situations; home financers insist borrowers on buying home loan insurance cover.
A home loan insurance cover is an insurance plan that covers the outstanding amount of your loan liability as per the original schedule in most cases. In case of the death of the borrower, the insurance cover helps the family repay the outstanding amount from the loan.
Now-a days, these insurance covers are available with other helpful features as well. Some Insurance plans provide critical illness cover at nominal added premium while others also cover home and its contents. Usually these are single premium plans.
Most lenders can help you with such policies as they have tie-ups with certain insurance providers, with added benefits, but one can buy home loan insurance policies independently as well.
- The application for the Home Loan insurance may be submitted through the lender or directly to the insurance company, depending on the borrower’s choice.Usually, insurance companies offer a cover under home loan insurance till the age of 60-65 years.
- The insurance is generally offered for the entire tenure of the loan. The premium depends on the factors like the age and medical record of the borrower, loan amount and the tenure.
- The premium can be a single upfront payment or paid as a regular instalment, which is bunched together with the loan EMI. Paying the premium in instalments will increase the regular outflow of cash due to the EMI payable towards the home loan. However, you’ll have to forego tax benefits on the policy premium if you choose this option. Those who pay the premium for a term plan or loan insurance are entitled to claim tax benefits under Section 80(C) of the Income Tax Act. But if your premium is fused with the EMIs, you cannot claim a tax deduction on the insurance plan’s premium.
- Also, a medical check-up may be required depending on the insurance company’s policies. Some insurers make the tests compulsory for borrowers
- above a certain age limit or those availing of an insurance cover above a certain threshold
You may also note that the premium is doubled in case of a joint application. In the event of the death of one of the joint applicants, the insurance company will be liable to make good the loss. It is always better to have a backup to fall back to in case of any untoward incidents, especially when it concerns your finances.