The majority of people raise loans to buy or construct homes, but a very negligible proportion of borrowers purchase home loan insurance. There are numerous advantages to purchasing home loan insurance. Repayment of a home loan is a significant financial strain, particularly for families with only one earning member. If the family’s single breadwinner suffers from a terrible sickness, loses his or her work, or dies in an accident, repaying the loan becomes extremely difficult. Home loan insurance comes in handy in such a circumstance.
Home loan insurance aka mortgage insurance, is a policy that provides a safety net to a borrower in unforeseen circumstances. Taking home loan entails a borrower’s long-term repayment responsibility, a home loan insurance policy assures that a borrower is assisted and protected in the event that he is unable to repay his home loan EMIs.
Difference between home insurance and home loan insurance:
Theft, natural calamities, and other causes of damage to the house and its contents are covered by home insurance. Home loan insurance, on the other hand, assists in paying the EMI if something occurs to the person taking out the loan for whatever reason.
Why it is important?
It’s important to remember that the decision to purchase insurance with a home loan is totally up to the customer. The borrower cannot be compelled to purchase the insurance.
In the event of the borrower’s accidental death, the remainder of the installment is deposited through this insurance. This burden is not passed on to others because of insurance coverage. Home loan insurance is available in the event of the borrower’s accidental death or permanent total disability.
In the event of the borrower’s critical sickness, insurance coverage is also available. The insurance company pays three monthly installments if the borrower quits his employment for whatever reason. Home loan protection plans are similar to term insurance in that you can choose the length of coverage. Your premium is determined by the length of the insurance policy.
When you cannot claim?
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The insurance coverage ceases if you transfer the house loan to someone else or close it early. Home loan protection plans do not cover cases of natural death or suicide. The insurance is not affected if you transfer the loan to another bank, prepay, or restructure it.
Where can you get this insurance and at what premium?
Home loan insurance is provided by the bank or non-banking financial company from which you obtain the loan. Home loan insurance is also available from insurance firms. The amount of the loan, the length of the loan, the borrower’s age, and his or her income are all factors considered by insurance firms when determining the insurance rate. Insurance premiums typically range between 2% and 3% of the total loan amount.