In the last article Some facts about Home loans you probably didn’t know ,I mentioned that it is good to go for Home Loan Insurance, I thought about writing this article just to clarify the concept of loan insurance.
Once you have got your loan sanctioned and are ready to purchase your dream home, you got one more thing to worry about. Will you be able to pay the EMIs uninterrupted? What if you meet with an unfortunate event and your loved ones are burdened with the installments of the loan. Since it is a home loan, it is a long term loan, one cannot possibly predict what can happen in the future. So why not make some arrangement to see that you stay worry free. That is where Home loan insurance comes in the picture. Home loan insurance is not the same as Property or home insurance which insures homes from natural disasters like earthquakes or storms, fire or burglary. Home loan protection insurance plans also cover disabilities due to accidents and also many critical diseases which make the loanee unable to pay the EMIs.
Term Insurance option
Now the title of this article is a question which is frequently asked by people who dream about a home. However, most of the banks which provide you with the loan will urge you to buy a home loan insurance plan. Some banks and their marketing guys focused on targets will try to force sell this product to you. Make note of it that it is not compulsory. You can even have a Term insurance plan to cover the amount of your loan. The sum assured can be used to pay off loan amount in case of loanee’s death. That is another way you can make sure that your loved ones are not saddled with a huge debt.
Term Insurance vs. Home Loan Insurance
The price difference between a Term insurance plan and a Loan protection plan makes the former a good purchase for some. Some times the price difference is 3 to 4 times which means Loan protection plans are expensive but as they come bundled with the loan, the bank will make sure that there are no medical checkups, no individual underwriting, and there will be an immediate and hassle free loan settlement in case of an unfortunate event
Be it any insurance, whether Term or Loan protection, you must understand that the price which you will be paying for the insurance is much less than that smile which will remain always on your family members’ faces. Yeah! I might have struck the emotional chord there. But I have seen many people had to go through such tough times where they had to vacate their home, they had their homes auctioned and had nowhere to go. That is certainly not a scenario I would put my family into. So it will be a wise move to insure yourself with either of the two. Better safe than sorry. Don’t remained uninsured or under insured.