Is It Mandatory To Buy a Home Insurance Policy for Your Home Loan?

Home loans have fulfilled countless dreams of home ownership into reality. In addition to providing financial support, home loans also provide favourable tax advantages. However, a home loan is not a short-term commitment. It entails committing to years, sometimes decades, of repayments. Now, to answer the question: is home loan insurance mandatory; yes! If something unexpected happens to you, your family might shoulder that financial load. That's where home loan insurance steps in.

 

What is a Home Loan?

A home loan is financial assistance provided by a banking institution or housing finance company. Its primary goal is to assist homeownership aspirants in acquiring or renovating an existing home. It is repaid over time with interest via instalment payments known as EMIs.

 

What is Home Loan Insurance?

Home Loan Insurance acts as a shield for your family's finances during challenging times. It is frequently referred to as a protection plan for home loans. It has declining coverage, which means that as the home loan amount decreases yearly, so does the home loan insurance coverage. If the borrower dies within the loan term, the home loan security provider pays the loan amount.

 

Consider this scenario: you're gradually repaying your debt when a disaster occurs, such as your untimely passing. Now, your family is responsible for repaying the debt. If your family struggles to keep up, the bank may seize the house. That's where a home loan insurance requirement comes in. In the unfortunate case of your death or disability, rather than leaving your family to deal with the debt, the insurance company comes in and handles it.

 

Benefits of Home Loan Insurance

Take a look below to discover why purchasing home loan insurance might be a wise decision:

 

1. Bundled with Your Home Loan: While it is not mandatory insurance for home loan India, lenders typically offer various home loan protection plans when you take one. This means you can quickly get coverage alongside your loan approval.

 

2. Simplified Premium Payments: Home loan protection plans work much like term insurance. You can pay a one-time premium or have it rolled into your loan amount, making it part of your regular EMIs. For instance, if your loan is ₹35 lakh and the premium is ₹2 lakh, if you can't pay upfront, it gets added to your loan, making it ₹37 lakh, paid off gradually.

 

3. Family Security: If the breadwinner unexpectedly dies, the family is left with the loan burden. Without insurance, the bank could seize the house or collateral. But with home loan protection, the family can claim the coverage, ensuring they're not left financially stranded.

 

4. Extra Protections: With a home loan protection plan, you may grab the option of adding coverage for permanent disability, serious illness, and job loss. This will protect you in tragic events such as your death or if you get significant sickness. The insurance will cover your overdue loan installment.

 

5. Tax Benefits:  It also gives a death benefit. For example, if the policyholder’s unfortunate demise occurs, the funds that your family acquires are not taxed. These funds help the family during difficult times. 

 

Wrapping up

Home Insurance is not mandatory. However, it will safeguard you during unforeseen times. It will help repay the debt and provide financial protection even during the breadwinner’s demise. Shriram General Insurance provides Home Insurance at an affordable premium. It also has a digital platform that requires minimal paperwork, and claim initiation can be done with a click. 

 

FAQs

1. Can home insurance be transferred to a new homeowner when a property is sold? 

No, home insurance cannot be transferred to the new owner. The new homeowner needs to purchase their own insurance.

 

2. What is the eligibility requirement for home loans?

The customer's age, financial profile, credit history, and other financial obligations, such as personal loans, are all important factors in determining home loan eligibility.

 

3. Can I pay my property insurance in installments?

Several insurance companies provide the opportunity to make payments in installments. Check your lender before signing the deal.

 

4. What coverage does home insurance provide? 

Property insurance often covers natural catastrophes and other unforeseen situations and risks.

 

5. Are home loans required to have home insurance?

According to the RBI, property coverage is not necessary for home loans. But your bank can still ask for it.

 

6. For home loans, why do lenders need home insurance?

By paying off the remaining loan balance, it safeguards against hazards associated with property loss.