Home is a basic requirement and a cherished dream for every individual. To turn this beautiful dream into reality, home loan is one of the most preferred routes in our country. At the same time, taking a loan to buy your home is a heavy liability that goes on for as long as 30 years. So, what can you do to safeguard yourself and your family for those unforeseen times.
“Mortgage insurance” & “Home insurance” are two essential components to be kept in mind while applying for a home loan. Both sound similar but are quite different actually. What’s the primary difference between these two? Should you go for a mortgage insurance? Is it beneficial while getting a home loan?
Let’s look for the answers to all these simple yet interesting queries related to a home loan.
Home Insurance vs Mortgage Insurance: Difference
Home Insurance provides protection against damage/loss of building that may include infrastructure, content of house in case of theft, fire or natural calamities etc.
Whereas “mortgage insurance” covers your home loan liability. Getting your property as well as home loan insured acts as a safe haven in case of any unforeseen events.
So, here we shall be highlighting some of the benefits of having a mortgage insurance in India.
Home Loan Insurance: Features & Benefits You Must Know
Home loan insurance, a crucial step to ensure that our loved ones don’t face any financial difficulty for clearing the loan amounts later on.
1. Safeguards Home loan repayment:
Home loan insurance is just like a term insurance plan that provides a cover to the home loan. When the borrower is unable to repay the loan for reasons like illness, permanent disability or sudden death, your insurer shall step in to pay the outstanding amount. In some cases, they protect you at times of job loss by paying the EMI for certain number of months. However, the rick covering clauses rendered by each insurer can be different and should be clearly understood at the time of taking the policy.
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2. Makes your family debt-free:
Although home loan obligation lies on the financial applicant/s, but in case of death or any casualty, your family can also come under the compulsion of repaying the loan.
Mortgage insurance comes as a saviour in these cases as if any unforeseen incident, as prescribed in the policy, occurs to the applicant, the insurance firm shall pay the outstanding amount.
This protects your family and loved ones from any possible struggles and financial burdens enabling them to be at peace in their abode.
3. Saves Your Property from Confiscation:
Your home is your long cherished dream and under no circumstance you would want your abode to be taken away. But if you have a home loan and cannot pay the EMI due to any fatality, the financial institution will be forced to recover the amount by confiscating the property unless you have the mortage insured. The insurance partner will repay the amount to the financial institution basis the clauses of the policy drawn, thus saving you and your family from such tough situations.
4. Tax benefits:
You can enjoy tax benefits not only with your home loan but with the mortgage insurance premium as well. You can avail Section 80C deduction for amount paid as premium. Consult your tax advisor or financial advisor for more information.
5. Opt for a suitable Home Loan Protection Plan:
There is a wide menu of mortgage insurance and property insurance plans available today with different riders. It is possible that a plan which is suitable for one may not be the wisest choice for another person. Hence, it is pertinent that you should clearly understand the terms and conditions, the regular coverage as well as the enhancements on it. Having a life coverage or term insurance plan however seems to be an optimal choice.
It is advisable to consult your financial institution to identify an appropriate plan based on the requirements as they shall help in faster processing and claim settlement. A lot of housing finance companies either have partnered with leading insurance providers or have their own insurance verticals which can help in buying insurance at a competitive premium.
Home Loan Insurance: The Bottom Line
“Home isn’t a place, it’s a feeling” as quoted in the words of Cecelia Ahern. So, you’ll definitely take every possible step to protect it from any unseen storms.
Further, buying a home involves a life-time investment. Home loan makes this investment easy with many financial institutions providing easy and hassle free service such as PNB Housing Finance Limited.
Although, it is not mandatory to get mortgage insurance along with the home loan, but a single insurance can safeguard you and your family from many potential troubles.
Few recent examples of similar situations have been the natural calamity that struck Kerala. Habitats were wiped out and there was a huge loss of lives as well as property. In such troubled times, people who had insured their homes were able to claim insurance and start afresh.
Selecting the right and cost-effective home loan insurance plan seems to be a daunting task, but a careful analysis of all the merits offered in the mortgage insurance plan and an in-depth consultation with the home loan lender can secure the future of your family.
Are you thinking to apply for a home loan soon? What is your take on mortgage insurance? Do you think mortgage insurance is beneficial in the long run? Feel free to discuss the same in the comments section.
Informative article. But does all banks provide it? What if I have taken the home loan from a NBFC? Can I avail the Insurance then also?
Yes Nishant, you can avail Insurance even if your loan is issued by NBFC.
However, NBFC such as Religare and Bajaj finance provide the insurance as a package. Get it touch with your loan issuing authority to avail this service.