Loan: If the borrower dies, the bank will not demand the outstanding amount from the family! Just do this one important thing..
In today's times, most people take out a home loan to buy their dream home. However, very few people consider what happens if the borrower dies during the loan tenure – the bank will recover the entire outstanding amount from the family. In such a situation, the house itself could be sold. Home Loan Insurance protects against this risk. It's a safety net that becomes the biggest support for the family during difficult times.
What is Home Loan Insurance?
Home Loan Insurance is a type of loan protection plan. When you take out a home loan, the bank or finance company offers you this insurance. If the person who took out the loan dies in an accident, the insurance company pays the remaining loan amount to the bank. This relieves the family of any financial burden and keeps the house safe.
Major Benefits of Home Loan Insurance
The family doesn't have to worry about paying EMIs after the borrower's death.
The risk of loan default is eliminated because the responsibility lies with the insurance company.
The bank cannot claim the house.
It provides both mental and financial relief.
It offers significant protection at a low premium.
Not mandatory, but why is it extremely important?
Taking Home Loan Insurance is not legally mandatory. There is no compulsion from the RBI or IRDAI. However, if you want to ensure that your family doesn't face any problems after your death, it becomes extremely important. This is why many banks have started including it in the loan amount. However, whether or not to take it depends entirely on your discretion.
How does the EMI option work?
The premium for Home Loan Insurance is usually 2 to 3 percent of the total loan amount. You can pay in two ways: by paying a lump-sum premium or by having a separate EMI for the insurance. Just like your home loan EMI is deducted, the insurance EMI is also deducted. The amount is not much, but the benefit is immense.
When is the insurance benefit not available?
If the loan is transferred to someone else's name.
If the loan is closed completely before its tenure. Many policies do not provide coverage in cases of suicide or natural death.
However, if you transfer the loan to another bank or make a pre-payment, it usually does not affect the insurance.
Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
