As real estate prices are on a constant high, the demand for home loans is on the rise too. Now, a lot of borrowers do not focus on home loan insurance, which is as important as applying for the housing loan itself. This type of insurance provides financial cover in a situation where you might default on the loan repayment. Even though it is not mandatory to buy home loan insurance, it is advisable to be under its financial security.
A home loan insurance provides coverage:
- In case of the primary applicant’s demise
If your family is dependent on you as the sole breadwinner, it is advisable to get a home loan insurance plan. This is so that your spouse can continue repaying the home loan if something were to happen to you. Even if you were an individual applicant, the repayment duty would still fall on your legal heir in the event of your demise. If your legal heir is unable to repay the housing loan, the lender will then have to confiscate the property. This is why it is so important to have homeloaninsurance that provides financial protection.
- In case the primary applicant faces a disability or critical illness
Home loan insurance also covers the policyholder for critical illnesses and disabilities. Getting this coverage would increase the premium, but it is worth considering if your housing loan amounts to a large value. Some home insurance policies even cover loss of employment too. Read the policy document in detail to understand whether these features are included in the plan or are offered as add-ons.
- Lenders receive protection from a home loan insurance plan
Lenders look to protect their investment, which is why they offer home loan insurance plans to borrowers. If in case you are unable to pay your EMIs because of a critical illness, your insurance will provide financial protection. This financial cover works in favour of the lender’s investment too. Some financial institutions sell home loan insurance as part of a package deal when you apply for home loan.
Home insurance and home loan insurance – Know the Difference!
Many get confused between a home insurance policy and a home loan insurance plan. Though they sound similar, they are different. A home insurance policy provides coverage for damages caused to a house due to natural calamities, theft, and so on. A home loan insurance plan on the other hand provides coverage for the loan that you apply for while purchasing a house.
Make sure to keep the above aspects in mind before availing a housing loan insurance. In addition, it is always considered best to use a home loan calculator to get an accurate estimate of the EMIs along with the home loan interest rate, which will help in easing your housing loan repayment process.