home-loan-insuranceUnexpected late night phone calls always carry a sense of foreboding.

When I received the call that my younger brother (in his early 40s) was hospitalized for a minor heart attack, I was understandably shocked. Here was a man, with a young family, good job, who had recently invested in a luxurious home, now lying supine in a hospital.

Of course, being young and overall healthy, he sprung back up pretty soon. With stern instructions from the doctor, he got back to his routine and took the trouble to reduce the stress in his life. But one of the first things he asked me when he got better was, “What will become of my family if something happens to me. I don’t want them to be financially burdened with this new home; what can I do?”

I was quite surprised that my brother had not opted to include home loan insurance as a part of the deal. Of course, he did get an admonishing from me on trying to cut corners, but I followed it up with advice on why this should be a New Year gift to his family!

What You Should Know About Home Loan Insurance

  1. The insurance is for the loan and not for the home and its contents.
  2. This insurance covers the family’s liability to pay EMIs if something happens to the principal borrower – you.
  3. If availed of – this insurance will cover all future EMIs that need to be paid. Some insurance providers also have a provision where the principal amount is returned to the family to make their future more secure.
  4. The cost of home insurance will decrease each time based on the amount paid to the bank.

Main Criteria on Which Premium is Arrived At

  1. Your age – the older the applicant, higher the premium.
  2. Your loan amount – higher the loan, higher the premium.
  3. Your loan tenure – longer the repayment period, higher the premium.
  4. Your overall health – Since my brother had a heart attack already, he will be considered a high risk and will have to shell out a higher premium now. If you are healthy, this will not be a concern.

Questions to Ask Your Home Loan Insurance Provider

  • Is the insurance applicable for death by any cause or only by accident?
  • How easy is the claims process?
  • Does my home loan amount have to be of a certain amount?
  • Can the EMI be paid in installments?
  • What are the exceptions?
  • Is a health check-up mandatory?
  • What happens in the case of pre-payment of loan?
  • Are there tax benefits?
  • Are there any implications if the loan is a joint one?

With these considerations, my brother has already got his home loan insurance taken care of. This New Year is going to be a much secure one for his family. Perhaps, its time you ensure the same for yours.

Major Take-Aways

  • Home loan insurance is often optional, but you must take it.
  • Home loan insurance covers the loan and not the home.
  • Some providers also give your family additional monetary benefits.
  • Home loan insurance premiums may be paid in installments or at one go, but there are implications with both.

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