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:
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.
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