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Hi All,
An amount of approx 21k is debited from my SBI Maxgain account against”SBI GEN PROPERTY INSURANCE”and that too without any intimation about the same. When I ask the Bank about the same, they said that it is mandatory to have property insurance if you avail the loan for a property from the bank. I found it very unprofessional on the bank’s side to sell me the product without even thinking it necessary to inform me about the same. Pls suggest if it is mandatory to go for the Propery Insurance and is it true for all the banks offering the Home loans. Is there any way to ask the bank to refund my money?

Thanks in Advance.
Brgds
Parag

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35 Answers

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1 Ashal Jauhari January 30, 2013 at 11:06 pm

Dear Parag, it seems the staff of your RACPC had not told you this property insurance thing at the time of loan documentation (sanction & signing so many papers all in a few min.). This property ins. is mandatory but All banks have tie ups with their own sister company, most of the time. Yes you are right, they should tell you in advance. But you w’d have to purchase one at the end of the day. by the way, in general, SBI asks for a separate check from any other bank account of yours for this prop. ins. prem. pmt.

May be this prem. also has been added up into your loan amount. Please check & read your loan documents for the same.

Thanks

Ashal

Reply

2 Agon M June 6, 2013 at 5:25 pm

Dear Ashal:

I have been an ardent follower of your writings on SBI maxgain and am a SBI MG customer chiefly because i came across your writings at the ‘RIGHT’ time.

I have a home loan of 41.20L, which got disbursed in Dec 2012.

At the time of disbursal:
(i)39,75,600 were given to the seller (in form of draft)
(ii)16000 were mentioned against ‘building insurance’ and
(iii)8400 were mentioned against Mortgage stamp duty.(was paid to the govt for the stamp duty at the registrar office)

In june 2013 an amount of 17,563 was debited from my MG account with a comment “DEBIT BUILDING INSURANCE TO SBI GEN INS “.

My query pertains to the serial (ii) above and the amount deducted in June. Am not able to understand the rationale behind the bank extending me loan with the insurance amount of 16K included (and charging interest on this component as well) and then deducting a different (larger) amount from my OD account.

Please advise so that i can understand/take this up with the Dealing Manager/Chief Manager (I have taken this loan through the Spl Home Financing branch and not through the normal Branch-RACPC route)

Many thanks and Sincere Regards,
AM

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3 Ashal Jauhari June 7, 2013 at 6:23 am

Dear Agon, please contact me over my personal mail ID with your account statement of Max Gain. I can not comment in isolation with out knowing the actual situation of your amount.

Alternatively, you can contact your HFC branch to know the exact prem. of that general insurance policy covering your property.

Thanks

Ashal

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4 Parag Gupta January 31, 2013 at 10:44 am

Thanks Ashal for your reply. Yes it was not specifically mentioned by RACPC manager who processed my loan. I found a clause mentioned in the loan document about Property loan but it nowhere states that it is mandatory to go with SBI General insurance. I am hoping that there would be not much difference in the premium amount of various general insurance companies.

Brgds
Parag

Reply

5 Ashal Jauhari February 3, 2013 at 9:15 am

Dear Parag, yes the prem. is nearly same from all insurers.

Thanks

Ashal

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6 Parag Gupta February 3, 2013 at 2:50 pm

Thanks Ashal.

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7 ppipara February 2, 2013 at 10:55 pm

Yes, I have also been deducted the amount, whereas I have already taken a term insurance separately. For this I had made one time premium option..

Kindly advice what could be done. I plan to visit SBI RACPC to get it sorted.

Reply

8 Parag Gupta February 3, 2013 at 3:04 pm

Hi Ppipara,

As Ashal said, It is mandatory to have property insurance as per Bank’s rules if you go for property loan. Property insurance is a General insurance to cover the property against Natural calamities or any untoward instances . It is not a life insurance. Though I have experienced that SBI says that it is mandatory to go for term insurance or Group insurance to cover loan from SBI life in order to avail Home Loan from SBI, but in fact it is not mandatory and you can convince them not to go for that.

Brgds
Parag

Reply

9 Ashal Jauhari February 3, 2013 at 9:19 am

Dear Ppipara, are you talking about Term cover or Property insurance? Please clarify.

Thanks

Ashal

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10 ppipara February 3, 2013 at 6:57 pm

I have taken term insurance in October last year at start of home loan.. It’s term insurance for loan… and now I have general insurance deduction

Reply

11 Ashal Jauhari February 3, 2013 at 8:50 pm

Dear Ppipara, the term insurance is for your life & general insurance for your property. Both are necessary from bank’s point of view. One has the option to purchase insurance from his or her choice of insurer but at the end of the day, both these insurance are needed. actually it’s beneficial to us also.

Thanks

Ashal

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12 ppipara February 4, 2013 at 10:06 am

Hello Ashal, Prayag,

I understand what you say, but for property insurance, I need to have flexibility of choosing, to be told on taking the loan and most important… Need to have the documentation given to me.None of this is done. very unprofessional on SBI side.

Also, I had previously taken loan from HDFC for previous home..it was not mandatory.

Thanks
Praveen

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13 Ashal Jauhari February 4, 2013 at 10:10 am

Dear Praveen, I can not comment on the SBI staff you dealt with. In my own case, the local SBI staff at RACPC was very co-operative & helpful. I was given the option to purchase property insurance either from SBI’s tie up or from my choice. I accepted the tie up one & interestingly in my case a separate cheque towards property insurance was taken from me. No deduction was there from my MG acct.

Thanks

Ashal

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14 ankit Gupta February 13, 2013 at 6:32 pm

I recently switched to SBI. After 35 days, 30800 has been added in my loan outstanding amount stating- DEBIT ADJUSTMENT-HOUSE PROPERTY INSURANCE. Which I remember, I never availed and neither talked about. I checked other websites and as per my Flat cost (market value 45 Lacs + 5 Lacs Appliances cost), they are offering insurance in premium ranging from 4000 to 11000. So in any case Rs 30800 are not justified. I talked in SBI branch and they said it is mandatory to insure property.

Now please advise what can I do?

I am very much frustrated with this unprofessional behavior of SBI personnel. And after switching to SBI, I feel there is no benefit as I have already been charged more than (55000 + its interest).

Reply

15 Ashal Jauhari February 13, 2013 at 10:43 pm

Dear Ankit, what’s the need to repeat your query in so many discussions? In a sense, it’s equivalent to Spam. Please take note of this.

|You are frustrated with SBI & venting it here in the forum by posting repeat queries. :) :)

I have already answer your query in following discussion.

http://localhost/jagoforum2/sbi-property-insurance-mandatory-when-buying-loan-from-them/4185/#comment-22661

thanks

Ashal

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16 ankit Gupta February 16, 2013 at 12:53 am

Dear Ashal,
You are right…I am highly frustated with SBI’s way of business. However I must say that you are very lucky to have such cooperative SBI officials.

Anyway, updates from my side are: I talked to branch manager and he said that 30K premium is too high. He has escalated this matter to RACPC. And will inform me on progress ASAP.

Thanks.

Reply

17 Ashal Jauhari February 16, 2013 at 6:08 am

Dear Ankit, please contact RACPC people also.

Thanks

Ashal

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18 Sandip Pawar February 24, 2013 at 1:20 pm

Dear Ashal,

I had little bit same problem here. I have taken SBI maxgain loan in Dec2011. Loan is still in pre-possession phase. I checked transaction and found that 15k had been debited from my Loan account against SBI General property insurance. Strange part is during signing loan papers, SBI had taken separate cheque of same amount 15k from me for property insurance purpose. So in loan account statement I found, SBI debited 15k from loan account on a day and immediately on 2nd cheque I had given for insurance has been credited to loan account.

So here, as per my understanding, as cheque credited to loan account, I am not paying interest on 15k. Am I right ?

But, I think my loan account’s drawing power (available loan amount) is reduced by 15k . So my last disbursement would suffer by 15k. Am I correct ?

What should be done now ? Please help me

Reply

19 Ashal Jauhari February 24, 2013 at 4:45 pm

Dear Sandip Pawar, you mean to say, SBI people mistakenly debited 15K from your MG account towards Property insurance & then to correct their mistake, deposit the other cheque into MG itself. As 15K amount has been deposited there, you should not be remain with lower DP. In case, due to SBI people’s fault, your DP has been reduced already, you may complaint the same to the AGM of your RACPC to get it rectified. Please complain it in written.

Thanks

Ashal

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20 Sandip Pawar February 24, 2013 at 4:59 pm

I am not clear if it happened mistakenly or what. But clearly I could see 2 entries in statement (1st – debit of 15k for insurance and 2nd – credit of my cheque of 15k).
Even how to calculate the remaining drawing power of loan account ? On statement DP is still equal to my total loan amount even if almost 80% of Loan amount has been disbursed to builder. Any other way to check available loan amount other than visiting branch ?

Reply

21 Ashal Jauhari February 24, 2013 at 5:06 pm

Dear Sandip, please check book balance of your account statement.

Thanks

Ashal

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22 Sandip Pawar February 24, 2013 at 5:38 pm

Book balance is much more, its almost 3L where only 1 disbursement of 1L is remaining. This might be because I am paying Full EMI.

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23 Ashal Jauhari February 24, 2013 at 5:53 pm

Dear Sandip, than relax, You ‘ll not fall short of 15K Rs.

Thanks

Ashal

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24 Sandip Pawar February 24, 2013 at 6:09 pm

This is from statement: If we see balance in row (3) and (5) its same. But point is if I have loan amount of say X, then bank would do disbursement of X only. But 15802/- has been debited from loan account for insurance then total disbursemnt to builder would be (X – 15802/-). Is it ?
Debit credit Balance
1)Transfer to builder – 10,98,688.00 -10,98,688.00 (1st Disburs.)
2)Interest 316 -10,99,004.00
3)Full EMI 25,572.00 -10,73,432.00
4)Debit – Insurance 15,802.00 -10,89,234.00
5)Credit – Insurance 15,802.00 -10,73,432.00
6)Interest 9,349.00 -10,82,781.00

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25 Ashal Jauhari February 24, 2013 at 6:20 pm

Dear Sandip, it’s the fault of SBI people. As of now, relax. In case due to that 15K property ins. debit, your actual disbursal of loan is reduced, then only you need to worry. In case At that time, indeed it’s a short fall of 15K, you may apy from your own pocket. Due to credit of that 15K cheque from you, you are not paying any interest on this ins. prem. debit.

Thanks

Ashal

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26 Sandip Pawar February 24, 2013 at 6:29 pm

Thanks Ashal for clarifying it.

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27 Sandip Pawar February 24, 2013 at 6:47 pm

Dear Ashal,
First, Sorry for asking too many queries.

As you know SBI charges loan interest as “base rate + spread rate”. During loan signing I got spread rate 0.50%.

If Base rate changes as per RBI rule it gets applied to us immediately. But spread rate remains constant for a loan account. Now SBI has decreased spread rate to 0.25% for new customer. SBI said I can switchover to new spread rate by paying certain fees. But switchover is possible only once in a loan tenure. So even further spread rate decreases in future I cannot go for it 2nd time. So should I do switchover or should wait more with the hope that spread rate would get decrease more ?

Reply

28 Ashal Jauhari February 24, 2013 at 11:49 pm

Dear Sandip, the original offered spread to you was 0.5% & current spread is 0.25%. There is very rare chance that SBI ‘ll go lower from this spread i.e. to 0%. In my personal opinion, you may switch to lower spread of 0.25% to get benefit of lower interest rate over all but do remember this change ‘ll cost you 0.56% fee. Please do calculate what ‘ll be your real benefit, if you pay this 0.56% fee upfront.

Thanks

Ashal

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29 ankit Gupta March 5, 2013 at 8:58 pm

I got cancelled my Property insurance from SBI General.

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30 Sandip Pawar March 26, 2013 at 2:35 pm

Dear Ashal,

My current outstanding Loan is almost 20Lacs, and Loan account is 2 years old only. Outstanding amount would reach to 22Lac soon after final disbursement. Today if I pay 0.56% on outstanding amount (please correct me if I am wrong here), then it would comes around 11200/- This would be one time fees. On doing so, if I say in next 4 years outstanding loan amount is as below:
2013 – 22L – I would save 0.25% (spread rate) = 5500/-
2014 – 17L – I would save 0.25% (spread rate) = 4250/-
2015 – 12L – I would save 0.25% (spread rate) = 3000/-
2016 – 7L – I would save 0.25% (spread rate) = 1750/-
Total saved interest on loan in 4 years = 14500/-
In above calculations, I am little bit confused :D :D, but still I feel that paying 0.56% fees and switching over to lower spread of 0.25 from 0.50 is beneficial. What do you feel ? Kindly let me know if my calculations are wrong somewhere.

-Sandip

Reply

31 Ashal Jauhari March 26, 2013 at 3:01 pm

Dear Sandip, how the loan figure is coming down so heavily in next 4Y? Yes for the said loan figure, the saving in actual interest outgo ‘ll be that much only as you have calculated.

thanks

Ashal

Reply

32 Sandip Pawar March 26, 2013 at 3:08 pm

“how the loan figure is coming down so heavily in next 4Y? ”
Yes. That is why I said I am confused on above calculations. I know its somewhat tough to repay so much loan in next 4 years. Repaying 5L per year along with Interest is tough. So in that case, my saving towards interest is gonna increase due to switching to lower spread rate. So I think I should go for switchover the spread rate to lower rate.

Reply

33 Sandip Pawar March 26, 2013 at 3:08 pm

What do you feel Ashal ?

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34 Ashal Jauhari March 26, 2013 at 6:26 pm

Dear Sandip, yes, please opt for lower spread. Pay the conversion fee & avail the benefit of lower interest outgo.

thanks

Ashal

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35 bhadresh January 29, 2014 at 1:57 pm

Hi Ankit,

>>>I got cancelled my Property insurance from SBI General.
What actions you took to cancel your property insurance?

Regards,
Bhadresh

Reply

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