Home loan insurance shields the family from having to bear the burden of loan repayment in the event that the borrower dies during the loan term. This insurance for home loan debtors lowers the risk for the lender. It ensures that banks and other financial institutions will be able to recover the loan balance even in the event of the borrower’s death, disability, or loss of income. The period of the loan protection plan and the loan term coincide. You can also combine life insurance with home loan insurance to shield the family from more general financial risks as well as the particular obligations of the home loan.
Home loan insurance: what is it?
Also referred to as the Home Loan Protection Plan (HLPP), this insurance plan provides coverage for the remaining balance owed to the lender in the event of the borrower’s untimely death. The bank or any other financial institution cannot require a home loan applicant to purchase insurance. Furthermore, none of the regulatory agencies have mandated that house loan purchasers purchase home loan insurance. It is entirely up to the borrower to decide whether to obtain home loan insurance.
Home loan insurance vs home insurance
Home insurance is the amount the insurance company compensates for the damage caused to the structure or things in the house due to unforeseen incidents. It covers the structure of the house and the items in the house against calamities. Anybody can purchase the plan irrespective of whether they have a home loan or not.
On the other hand, home loan insurance refers to the extent of the home loan liability. Pays off the dues in case of the death of the borrower. Only home loan borrowers can purchase the policy. Going forward, a home loan insurance coverage is ideal for people who want to buy a house or property early in life but only have a little amount of cash. This is due to the insurer’s assurance of loan payback. The house loan policy offers the choice of paying back the loan in one lump sum or in several instalments spaced out over time.
Benefits of Home Loan Insurance
1) Act’s as debt relief: Guarantees that in the event of your death or disability, your family won’t be plagued by unpaid EMIs.
2) Direct Pay-out to Lender: As claims are paid to the bank immediately, default risk and administrative obstacles are reduced.
3) Low Premiums: In comparison to the total covered, premiums are more reasonable under a pure risk design.
4) Tax Benefits: The total tax burden is decreased with home loan insurance. Section 80C of the Income Tax Act 1961 allows for the deduction of home loan insurance premiums.
Best Type of Home Loan Insurance Policy in India
1) Hybrid Home Loan Insurance Plans: The coverage remains constant for the first year under this top house loan insurance plan in India. As the liability begins to decrease after the second year, it continues to fluctuate based on the outstanding liabilities.
2) Level Cover Plan: A mortgage insurance plan with a level cover plan has a coverage amount that stays the same for the
duration of the house loan.
Is It Mandatory to opt for Home Loan Insurance?
Home loan insurance is not required for borrowers under any RBI or IRDAI statutes. To reduce their risk, many banks, however, need a credit protection plan, which they could include in your loan offer. If you want better terms, always check your loan agreement and choose to opt in or source coverage independently.
Important things to consider while buying home loan insurance:
1) Both general and life insurance companies provide house loan insurance.
2) The policies that general insurance firms offer usually need to be renewed annually. Their premium is reasonably priced.
3) On the other hand, life insurance companies’ house loan insurance policies have a greater cost and give coverage for a longer period of time.
4) Never confuse home insurance with home loan insurance. The former offers protection only against damages to your property and its contents.
While property insurance and home loan insurance address different facets of homeownership, they are complementary shields, one for your asset, the other for your liability. Neither is legally mandatory under RBI/IRDAI, but both deliver invaluable peace of mind. Assess your property value, loan tenor, family obligations, and risk tolerance to craft the right combination of covers. Protect what you own and secure what you owe for a truly worry‑free homebuying journey.
