These Days, Everyone is thinking to buy an Insurance cover for the home loans. It’s because of booming real estate prices and high interest rates charged on home loans.
Now the Question is, if something happens to the borrower. Than the family afford to pay the EMI’s or Not. Or they can be dispossessed from the House.
For Cover these types of risks and big loan amount, Take an Insurance Cover against the loan.
Two Ways of Insure your Home Loan
- Home Loan Protection Plan (HLPP)
- Pure Term Cover
Home Loan Protection Plan (HLPP) – “HLPP, regularly sold along with the housing loan, offers a risk cover (sum assured) equal to the loan amount. As the outstanding loan amount reduces, the size of the cover also reduces.
For example – A 20 year home loan of Rs 25 lakh at 9.5%, HLPP (with a sum assured of Rs 25 lakh) will cost around Rs 86,325. Usually it is a single premium policy. By December 2017 the outstanding loan amount would be over Rs 20.5 lakh. “If the borrower dies at this stage, the insurer would pay off the balance Rs 20.5 lakh directly to the bank or the borrower’s family and the loan is closed.
Pure Term Cover – Incase of PTC (of Rs 25 lakh), the family would get the entire sum assured of Rs 25 lakh. “Even after settling the loan amount, the family can still make a saving of Rs 4.5 lakh.
Earlier term plans were more expensive than HLPP. “However, with the advent of online term insurance plans, a home loan borrower may end up buying a term plan cheaper than HLPP.
The Biggest Advantage of a Term plan is the life cover remains constant whereas in HLPP it keeps declining.