Purchasing a home is likely to be a top priority in the lives of most working individuals. While the best case scenario would allow you to purchase property utilizing only your own funds, this may not always be the case. Most people often end up having to solicit mortgage loans which allow them to borrow up to 80% of the amount required to purchase a property- with the property itself being used as collateral- and pay the sum back over a fixed period of time with interest. These types of loans are often only issued to those with a steady source of income and good prior credit history. Additionally the regular payments made, referred to as the Equated Monthly Installments(EMI) should preferably not exceed 50% of the borrower’s income as this would greatly increase the risk on the lender’s part.
When considering the fact that these loan amounts are often considerably larger than some other types of loans such as personal, educational or automobile loans, they can become a huge liability in situations where the primary breadwinner in a household either passes away or is incapacitated due to illness or injury. In such cases, the household's income stream is likely to dry up either partially or completely and their next of kin may find it difficult to make regular payments without defaulting. An often used method of dealing with this situation is through the purchase of a life insurance policy that accounts for the repayment of these loans in the event of the policyholder’s death or incapacitation. Possessing a life insurance policy with such conditions is a recommended step in devising a financial strategy for mortgage loan repayment. There are a number of policy types that can be purchased depending upon the loan amount, repayment period, type of coverage desired and the borrower’s income. They have various pros and cons which are vital to understand before deciding upon the best life insurance policy for the redemption of your mortgage :
Most of these policies are tax exempt under Section 80C, however those with lapsed term policies cannot avail this benefit. Understanding the amount of coverage you require as well as any additional top ups is vital in picking an appropriate policy type to secure your mortgage. There is quite a bit of information that needs to be digested before you are able to decide on the best life insurance policy to secure your family against defaulting on your mortgage under any circumstance.
Opting for the iSelect Smart360 Term Plan from Canara HSBC Life Insurance provides flexibility in coverage amounts as well as whole life cover, premium return and short tenures of up to 5 years to ensure that your family isn’t burdened with mortgage repayment in any situation.
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