Everyone in India dreams of owning a house someday. Most people opt for a home loan to buy their dream house. A home loan is a long-term commitment, and you should understand what you are committing to by taking the loan. The home loan tenure is usually 15 to 20 years, so you commit to paying Rs X per month for the next 15 (or 20) years. Life does not come with any guarantee cards, and there is no surety it will go as per your plans. You certainly don't want your family to go through this phase. A term insurance plan is a solution to the problem.
In this article:
a) Home loan linked term insurance plan b) Home loan protection coverc) Buying a separate term cover for home loan d) Benefits of a separate home loan cover e) How to buy a new term cover?
If you are the only earning member in the family and paying the EMIs and something happens to you, the burden of paying a loan falls on your family members. If they fail to repay the loan or pay regular EMIs, there may come a situation that your home (or collaterals) may get seized.
Term Insurance Plan for Home Loan
Nikhil is 32 years old and married. He had an existing term insurance plan that offered him a sum assured of Rs 50 lakh. As per Nikhil's calculation, the amount was decent till now and secured the life of his loved ones.
Recently, he took a home loan of Rs 40 lakh, and now he feels a risk to his family's financial safety if something happens to him. If something happens to him, of the sum assured of Rs 50 lakh, more than half will go in paying the home loan to make sure his family continues to have the house. The remaining will not be enough. A term insurance plan secures the future of his family.
Home Loan Protection Cover
There is another way to protect your family if you have a home loan. You can buy a home loan protection plan. It ensures, if you die, whatever is the pending loan amount is taken care of by the insurer. It will ensure your dependents don't become homeless in your absence or a crisis situation.
You can buy a standalone term cover equal to the home loan plan. In such a plan, the size of the coverage is linked to the outstanding home loan. It means the sum assured goes down when you pay your loan amount.
Buy a Separate Term Insurance Plan
You can also be in the same situation as Nikhil in the above example. Hence, you should have a term insurance plan to cover your home loan. Nikhil already has a Rs 50 lakh term plan, and now with a loan amount of Rs 40 lakh, he feels a need for additional coverage. He can go ahead and buy another term insurance plan of Rs 40 lakh. If something happens to him, the separate term plan takes care of the loan part. With two separate term plans, it will be easy for his family to manage the sum assured they would receive from the insurance company.
Increase your existing cover
Term plans by Canara HSBC Oriental Bank of Commerce Life Insurance like iSelect Smart360 Term Plan come with coverage options that let you increase your sum assured with your needs. If you have a life cover of Rs 1 crore and you take a home loan, you can increase your cover by an additional 25% to Rs 1.25 crore. The premium amount, in this case, will be lower than the cost you would have paid if you had bought a new policy for an additional Rs 25 lakh.
Four Benefits of Buying a Separate Term Cover for Home Loan
Below are some of the benefits of buying a separate term insurance plan:
1. Protect your family
In case of an unfortunate event, your family will already be going through a tough time mentally. You don't want them to worry about the home loan or the next EMI or about the collateral you have kept against the home loan. Once they have a separate term cover, the process of working things out will be easy for them.
2. Protect your other assets
When you have a separate term cover for a home loan, your other assets are always protected. If you don't have a separate term cover, your family may have to sell the other assets that you would have invested for the long term.
3. Tax benefits
The premium you pay towards your term cover is eligible for tax deduction under Section 80C of the Income Tax Act.
4. Peace of mind
With a separate term cover for a home loan, you can sleep peacefully every night, knowing if something happens to you, your family will not become homeless - your home is protected even in the worst of situations.
How to Buy a New Term Insurance Plan Online?
Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Smart360 Term Plan can be purchased online in the below steps -
1. Select the Plan option as per your insurance needs - Life, Life with Return of Premium, and Life Plus.
2. If you have selected Life Plan Option, you further need to select below:
- Do you want a Level or Increasing coverage option?
- You can also select in-built covers like Accidental Death benefit, Accidental Total & Permanent Disability Benefit, etc.
- If required, you can add your spouse
3. Select the Benefit payout option - lump sum, monthly, or a combination of both.
4. Once you have selected the above options, you can choose the sum assured, policy term, premium payment term, and mode.
5. Answer a few questions like your age, gender, lifestyles, habits, etc.
6. Generate your premium quote and fill in other personal information.
7. Read the policy terms and conditions and make the payment.
With a home loan, you add additional responsibility on your shoulders. You can reduce the risk of additional responsibility by buying a cover for your home loan.