A home is an expensive investment. Hence, it is important to check the decision’s viability before buying a house. People don’t have the money to pay upfront for a house, and they prefer getting a Housing Loan to finance the purchase. Even if you opt for a Housing Loan, you need the financial stability to pay it back in time.
Paying back loans can get more challenging if an unforeseen event like a death or a job loss happens. To manage such challenges, you can use a Home Loan calculator to manage your finances better.
Taking a Home Loan protection plan is better to avoid making mistakes with your Home Loan. While many might not know about this, it is important to get a Home Loan protection plan while taking a Home Loan. This guide will take you through everything you need about Home Loan protection plans and how they safeguard borrowers.
Understanding Home Loan Protection Plan
A Home Loan protection plan is an insurance plan that covers your Home Loan payments and even the house that you buy or build from the loan amount.
In case of the borrower’s unfortunate demise, the insurance provider who offers the Home Loan protection plan makes all the remaining payments toward the Home Loan. Hence, the borrower’s family will not have to bear the burden of repaying the loan balance.
The term of a home protection plan is the same as the tenure of the loan. Beyond that, the house’s liability remains with the borrower and the other nominees they might have assigned. The borrower’s responsibility is to opt-in for a Home Loan protection plan to safeguard their family from the financial burden of paying the loan back.
By opting for a Home Loan protection plan, the insurance provider will make all the loan payments, and the ownership of your house will shift to your family members without any hassle in the event of your death.
Buying or opting for a Home Loan protection plan is not mandatory. However, you must go for it once you understand its features and are sure it will help you.
Features of the Home Loan Protection Plan
Some of the important features of a Home Loan protection plan are listed below:
- It is a term insurance policy that takes up the diminishing value of the Home Loan.
- The Home Loan protection plan comes with death benefits. If you are looking for disability benefits, check with the lender and insurance provider.
- In most Home Loan protection plans, you need to pay a one-time premium. However, it can be clubbed with your Home Loan EMI if you want to avoid paying a lump sum upfront.
- The sum insured decreases with every EMI the borrower pays towards the Home Loan.
- The borrower doesn’t get any maturity benefits in Home Loan protection plans.
- If the borrower dies, the insurance company will make a lump sum payment toward the remaining loan amount. After that, the policy will lapse.
Things to Check Before Taking a Home Loan Protection Plan
There are a few things that you must check before you opt-in for a Home Loan protection plan.
Before paying your insurance premiums, use the Home Loan calculator to manage your finances. Once you have your finances placed properly, check the mode of payment and how you want to pay the insurance premiums. You can make your payments in the following ways:
- Lumpsum premium payment
- Regular premium payment
- Limited premium payment
Insurance coverage is significant for Home Loans since not all insurance companies offer coverage for unforeseen professional disasters, catastrophic sickness, job loss and incapacity. Therefore, it is essential to understand insurance coverage before making a choice.
Having a Home Loan protection plan with your Home Loan is important. It safeguards you and your family from loan EMIs if something happens to you. When you take a Home Loan protection plan, the insurance company pays the balance of your loans in the event of the borrower’s death.