Main Features of a Home Loan Insurance Policy..!

By Anil Rego, Right Horizons

Although a house is the best gift to one's family, one surely does not want to burden them with a hefty housing loan, in case of an unfortunate event.

It is important to shelter your family against such unforeseen burden.

Home loan cover comes to ones rescue in such an eventuality, but often people ignore this aspect whilst availing a housing loan.

There are few common main features among most home loan covers.

Anil Rego, Right Horizons

Here is an overview of the typical features & how they work:

Protection Against Loan Liability..!

The very purpose of availing a housing loan insurance is to have a cover for the outstanding loan liability. Typically, the loan cover will enable the survivors to close the loan in case of an eventuality with the borrower.

The cover is of reducing balance method.It would run parallel to the outstanding loan liability for which one is paying the premium.

Add on Benefits..!

Apart from eventuality, one can also avail protection against hospitalisation & disablement as a result of sickness / or accidents.

One can also have an additional rider to cover for terminal illnesses.

Flexible Premium Payment Options..!

There are single premium options or / regular premium options. Typically, for any housing loan cover with regular premium payment option, the premium payment term will be lower than the term of the loan.

Income Tax Benefit..!

The premium paid towards your housing loan cover will quality for deduction under Income tax Section 80C, and the death benefits derived are tax­ free under Section 10 (10D).

Protection Against Interest Rate Changes..!

 Housing loans are subject to fluctuations due to interest rate movement. Some of the home loan covers ensure that the benefit is higher than the outstanding loan irrespective of the interest rate changes.

An alternate to housing loan cover is to increase the term cover by the outstanding loan amount.

In this, the loan liability would decrease over the years. However, your term insurance cover would remain constant, thereby creating unnecessary cash outflow in the long haul.

About the Author..

Mr. Anil Rego is CEO & founder in Right Horizons.

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