Home Loan Insurance

It is important for borrowers to remember this and plan their finances appropriately. But if you take out a loan from a bank, an NBFC, or a housing finance company, you are not obliged to get home loan insurance. Regulatory bodies such as the RBI and IRDAI state that if a borrower takes out a home loan from any financial institution, they are not obliged to buy a home insurance policy.

Meaning of Home Loan Insurance

Home Loan Insurance, also called Home Loan Protection Plan (HLPP), is a program that practically all financial institutions offer. In the event of unanticipated events, such as the borrower’s death, the insurer will pay the borrower’s outstanding or remaining home loan amount to the lender or bank.

One kind of insurance plan is the Home Loan Protection Plan (HLPP), also known as Home Loan Insurance. The insurance company pays banks, NBFCs, or housing finance companies the remaining balance of the loan in the event of the borrower’s death.

The policy period usually runs parallel to the loan term. By obtaining Home Loan Insurance, the borrower guarantees that, even in the event of their passing, their heirs won’t be forced to forego making loan payments or vacate the property as a result of nonpayment.

Importance of Home Loan Insurance Cover

Lenders hope that their loans don’t turn into bad debt. They would want to protect their money. To keep a house loan from becoming a significant financial burden, lenders demand home loan insurance. The lender will suffer a significant financial loss in the event of the borrower’s death, particularly if the borrower is the family’s sole provider of income.

The home loan insurance plan will pay the remaining loan balance in the event that the borrower defaults on their payments. A situation like this could arise from the borrower’s death or unstable work. You have the option of choosing a basic plan or one with more features and better coverage for riders. Because it guarantees that the borrower’s dependents won’t become homeless while they are away from home or in an emergency, home loan insurance is essential for borrowers.

Characteristics of Home Loan Protection Insurance

One-time payment: The premium for the home loan insurance plan may be made in full at one time. Additionally, buyers have the option to pay the full loan amount in installments by combining the premium payment with the total.

Borrowers on a joint home loan: All co-applicants on the same loan are covered by the home loan insurance plan. Therefore, if three family members insure their home loan, the plan will cover the untimely death of one of them.

Riders and Add-ons: In the event of the borrower’s death, the basic HLPP will pay. However, you can add coverage for serious illnesses like cancer, heart attacks, and traumas to your home loan protection plan by adding a rider scheme that has an extra premium. Up to six months’ worth of EMI payments may also be covered by the add-ons for unemployment and disability.

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