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What is meant by a term insurance plan for home loan?

What is meant by a term insurance plan for home loan?

What is meant by a term insurance plan for home loan?

As exciting as buying the first house is, it is also a great financial obligation if you are using a home loan for the purchase. Lenders often insist on getting a term insurance which covers the home loan in case of your demise. The offer sounds legitimate if you have a family and you want the house to stay with them even after your untimely demise.

However, what if you could avail better benefits at almost the same cost? Before we explore the benefits of buying a separate term life insurance let us understand the term insurance for home loan.

What is Term Insurance for Home Loan?

Home loan is one of the biggest financial liabilities you may encounter in your life. However, given the importance of the house for your family, you do not want the asset to slip away due to a contingency.

Thus, you cover the risks using life insurance plans so that, even if you meet the ultimate fate early, your family can repay the loan and own the house. But, should you consider a term cover equal to your liability? Ideally this will not be enough, as home loan is not the only cost your family has to bear in case of your sudden demise.

They will need to run their household and life expenses without the support of your income, and somehow still meets the future financial goals. This is where a separate term plan with adequate life and other covers comes into the picture.

Additional Benefits of an Adequate Term Plan

You can provide a lot better financial safety to your family by availing a larger term insurance cover than the home loan. In fact, home loan should be an added term cover to your existing term insurance for the family.

While with a separate cover you can select a better life insurance with all the missing covers as added benefits, there’s more you need in your term insurance plan:

Regular Income with Lump Sum Payment

You can provide your family with not only lump sum money to pay off the lender and keep the house but you can also add a regular income benefit. This obviously means a larger cover, but for your family, this will be a better option.

For example, the term plan from Canara HSBC Oriental Bank of Commerce Life Insurance can pay the death benefit as a regular income which grows by a fixed percentage every year.

With such term insurance plans you can help your dependents run the household without worrying about investing a large sum of money.

Whole Life Term Cover Option

If you want, you can even opt for a whole life cover instead of just 20- or 30-years term cover. This option converts your term life insurance into an estate plan, as the benefit amount will go to your children even in case of natural death.

This option is especially attractive with the limited pay option where you can limit the premium payments until retirement.

Get Your Premiums Back

In any case, even if you do not want the cover to last for a lifetime, you can still receive all the premiums you have paid back at the expiry of the policy term. This option is called a term plan with return of premium and is the most cost-effective term plan option.

Provide Adequate Cover at a Nominal Cost

With online term plans, you can even offer the same or even better coverage to your family. Not to mention the number of added benefits. Still, if you feel that the term insurance cover should decline with your liability, you can even opt for a reducing term cover with the i-Select+ term plan.

Although, the cover amount will keep on declining as you age, the reducing term cover provides your family with better coverage than HLPP. Here’s how:

  • The cover remains the same till the age of 60
  • After the retirement age the cover reduces at a fixed rate
  • The reduction will only continue till your remaining sum assured is 50% of the original cover
  • There is no reduction afterwards

Thus, even with reducing term cover your family will enjoy adequate life cover till your retirement.

Term Insurance Stays with You

The benefits of a separate term insurance cover will stay with you regardless of your home loan status. The benefits stick to you even when you transfer the loan to another lender or prepay your home loan.

With today’s online term insurance plans, you can even expect a fast claim settlement. For example, Canara HSBC OBC Life takes a maximum of five working days to process term insurance claims.

With faster claim settlement your family can repay the home loan quickly without hassles and continue on with their lives.

Speak to an insurance specialist now!

Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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