4 things to do, when you are forced to buy a Policy with Home Loan !
POSTED BY ON December 24, 2012 COMMENTS (223)
Have you even seen cases where when a person wants to get a home loan, and the bank or the lender says that taking some kind of ULIP policy or some other kind of insurance product is mandatory if you want the loan to be approved? Most of times, banks impose this restriction in the final stages of loan approval process because that’s the time when most of the customer will not reject the option and will forcefully go for it, because they don’t want to lose the home loan for this tiny roadblock.
If you are thinking about 50 lacs of home loan, you will not get stopped by this 40,000 per annum premium policy. Here is a case which was discussed on our jagoinvestor forum.
I recently planned to buy a home. So, after market research I approached SBI bank. But the manager informed by saying that ‘I need to take SBI Insurance along with home loan’ else will not sanction SBI home loan. Please let me know whether is it the case with SBI home loans?
Cross Selling is Unfair – IRDA
Some customers falls for these kind of gimmicks, but in reality there is no compulsion to buy any kind of product with home loan. It’s just a marketing gimmick and a way to exploit people. IRDA itself has clarified in its circular that this kind of bundling or forced selling is not fair and should be stopped. However banks still continue to ask customers to buy the insurance along with home loans and ill treat them.
Tying is defined as two or more products packaged together where at least one of the products is not sold separately while Bundling occurs when products are packaged but are also available separately. There could be various issues of concern for the consumer that arise from cross-selling. Packaging two or more products could become unfair to the consumer when it impedes his or her choice or makes price comparisons difficult or impossible.
One of the major concerns is bringing in transparency to prevent unfair commercial practices. At the same time, cross-selling facilitates service providers to use existing channels to reach out to those who are looking to buy insurance products. It is, however, necessary to ensure that the consumer is not put to any kind of disadvantage because of the packaging.
J. HARI NARAYAN
CHAIRMAN (IRDA)
So what’s the way out? It might be, that if you are careless on documentation front, the bank might sell you the policy and you come to know about it very late; like it happened in this case where Axis bank sold life insurance along with home loan to this guy. While you always have an option to go to consumer court over the issue, that comes a little later.
What way you can settle this at the bank level itself? The main idea is to communicate to bank officials that you are not a easy bait and are an informed investor who knows his rights as a customer. Below are a few things you can do in a situation when bank tells you “Sir – Insurance is compulsory along with home loan, else it will not be processed”
What to do when forced to buy insurance along with home loan ? Lets see 4 tips which you can use when you are told by your lender that some kind of policy is mandatory to buy along with home loan.
Option 1 – Directly tell them, you know the rules
One of the simple things you can do is tell them straight forward that you know the rules on this, you are aware about the RBI circular that these practices are not fair and ask the bank for an explanation on how they are still doing it. Also tell them, that you have yourself helped another friend of yours to get a home loan without the bundled insurance when XYZ bank asked for it. You can tell them that you have already filed for RTI to IRDA and asked for this, if they want you can bring the RTI reply from IRDA. This first tip itself should be enough for your home loan provider to come to the right path.
Option 2 – Reject the Offer and Wait – They will come back
When you show desperation, they know you will do anything for getting a home loan and that’s one reason why they put forward such idiotic restrictions of taking policies. Another thing you should do in these kind of situations is that you can just reject the offer totally and tell them that you really are not so desperate to get the home loan, you can wait for some months or you already know other bank officials who have not put forward such kind of restrictions . In all probabilities, they will just come on track or if not that time, they will be back to you later saying – “Sorry Sir, we take back that restriction .. blah blah… ” This is exactly what happened with Muthu Krishnan which he shared on this blog some time back
IDBI tried to con me in similar manner. I told them that I don’t need their loan. After two days, they called back and offered loan without insurance which i accepted. Though you are absolutely desperate for loan, do not show it to the banks. The banks are very desperate to disburse loans as it is their livelihood and not ours. They will come around to our terms.
Option 3 – Ask them to give it in writing
The next option is to look at the bank official and ask him to give in writing that “Buying the Policy is mandatory along with Home Insurance” and also tell them you are thinking of inquiring about this with banking ombudsman because you have already filed a case for your friend and got compensation for this. If they are not ready to give it in writing, tell them that you don’t need home loan from them anyways, but you will still file a complaint with Banking Ombudsman to see what can happen and politely ask the official if he can also share his Name, designation and Employee id for additional information.
Option 4 – Take the Policy and return back in Free Lookup period
This is the last option, but if you feel that other options are great but you are victim of family pressure and at this time just need to go ahead even though you are disgusted by this force game, just go ahead with policy and pay the premium for first year. Then be a little alert and make sure the moment you get policy documents, just initiate the process of returning back the policy within the 15 day free look-up period . For those who do not know, the free look up period starts from the day you get the policy in your hands, not from the day you bought the policy. This helpful tip was shared by one of the person who shared his case with ICICI mis selling.
Conclusion
Any kind of loan should not be bundled with other products. Most of the bank officials try to pressurize the customers just to meet their deadlines and targets. So do not fall for forced selling and act like an informed and powerful customer.
Have you come across a situation like this? Can you share?
One of the bank from which I took home loan forced me to buy shares of the bank, but even after nearly 2 years they are not giving me my shares and now I am nearing completion of my loan, 180 months according the sanction letter. Now they are say that you have to pay extra 6 months. When I asked them reason they said there was a increase in rate of interest so you have to pay more installments . Funny thing is that around 10 years ago they increased the interest rate and it continued until 2022 when I asked to revised my interest rate, which was lower than I was pay. So they agreed to lower my monthly EMI. What I should do?
You agreed to all this in written right?
What is mentioned in the contract?
Hello,
BOB is telling me that the insurance with following cover is mandatory to get a home loan. can you please advise me.
1) Earthquake-Building
2) Fire-Building
3) Riot strike malicious damage-Building
Yes, I think in case of PSU , its like that !
Hi Sir,
I got my Home loan approval from PNB Housing Finance, but just after that the executive said for the sanction process insurance is mandatory.
I got below on my sanction letter finally:
Loan Amount Approval: 25,10,000
Insurance Amount: 1,10,000
I was left with NO option than to sign the documents for my sanction completion.
So, i did it (As they said its mandatory).
I have my loan disbursement at the time of Registry next week.
Can i do something on this now…??
Please Help.
Get your loan done first and then later surrender the insurance policy within 15 days .
Sir, My dad took a loan of 6.5 lacs in 2009-2010 from PNB housing finance. But it is in 2020 we got to know that our loan amount is 7 lacs as their is a life insurance of 50k which we never knew. My dad is not well educated and at that time even I was a kid, so we could not get it checked. They didn’ even gave us sanction letter, insurance bond letter or any document. Is there anything be done now? Can court help?
If you can prove these things then you can do a lot of things .. complain to banking ombudsman after complaining to the PNB housing finance team ..
Sir, today they gave me the copy of insurance. I amazed to see that they are the policyholder for which we have to pay with interest. Please suggest how can I prove my point. Do i need to go consumer court? Can I hope for justice?
Better reach out to IRDA with complain on this. They should have informed you about this long back
Sir I am taking axis bank loan for 20lacks but bank people telling in last movement home insurance s must what can I do
As per RBI this is illegal and they can be fined for that. Show them the circular which I have put in the article. As far as I know, only and only home insurance (house holder policy needs to be taken, but not a home loan insurance)
Manish
I tried opening RBI circular which you shared in word and notepad, but seems its not opening correctly. Can you please send this circular of RBI on amrut2123@gmail.com please?
Please make sure you read articles. ITs mentioned there itself
https://www.irda.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo1611&flag=1
good job !!!!
Sir,
I applied for a home construction loan for Rs 28 Lakhs in SBI. They seem to have sanctioned Rs.28,62,000 which includes Rs.62,000 towards Life Insurance. I have only been communicated on phone and no SMS or emails regarding the approval hence no proof in my hands that the loan is approved. However I have no intent to buy the insurance.
I think they will provide me a Loan Sanction Letter for Rs.28,62,000 which I will be asked to sign to proceed further.
My question is, should I push them to give a new sanction letter for only Rs.28,00,000?
Or can I just provide them a letter stating I do not need Life Insurance and sign the original sanction letter?
Please provide your valuable advice.
Thanks,
Pradeep
Yes, tell them that you are not buying the insurance as its against RBI notification. If they do this, you will complain to RBI and make them loose their jobs !
Manish
Hi
My name is vikas.SBP has made 9k deduction from my loan account with respect to home loan protection plan by sbi with my consent.When i talked to officials then they said these are the guidelines by rbi.Please give clearification on this asap.
Investigate on this …. this is no compulsion like that from RBi .
I taken loan 21 lakhs in DHFL but they are forcing me to take home shield policy of about 90 thousand it’s compulsory otherwise we have to drop the loan they are telling like that please suggest me.
Dont take the policy and ask them to cancel the loan and tell them that they are going to loose their jobs as you will drag them to banking ombudsman and RBI and even consumer court. See how they change the colors !
Hi Manish,
I took home loan from SBM and they asked me to take life insurance for an amount of 25000 and told that it is mandatory. So I took it. Now as my interest is increasing, I have transferred my home loan to SBI from SBM.
Loan amount is 9.7 Lakhs for 10 year. Now SBI is asking to take property insurance against market value of 30L for my flat. They are saying premium is around 8500 for 10 years. I told that I have SBI life insurance already against my home loan, should I take property insurance again? They are forcing me to take property insurance even if i have life insurance against my home loan. Please suggest me what should I do?
No, you should not take it .. Tell them that you will complain with insurance ombudsman
Thanks for reply Manish. I will tell same. Thanks.
R/Sir, I am Kamlesh Kumar Chaurasiya taken Home Loan of Rs. 23,00,000/- from Canara Bank with insurance cover for 20 years. Now I am intending to repay all outstanding HL Amount to Canara Bank. So kindly tell me after closing my outstanding HL amount insurance cover will be remained or otherwise.
It wont be there, because there is no home loan once you pay off the loan !
i took personal loan from sbi but bank manager forced me to take a cover policy otherwise u will not get the loan..now what should i do as i have taken the policy
You should complain to insurance ombudsman on this
Did any one had bad experience in Punjab National Bank ? Are they also selling insurance policies along with home loan?
Which is better to go loan for HDFC , LIC or Punjab National Bank? I have salary account with HDFC. Please suggest in terms of Processing fee, hidden charges, their home insurance etc.
Thanks in advance
In my opinion, HDFC is a good option. You can go with them. However based on your numbers, I also suggest you analyse which bank is offering you the best deal. You can find it out here
http://jagoinvestor.dev.diginnovators.site/solutions/apply-home-loan
Yes this bundling happend to me from SBT..They sold me HL of 29 lakhs with SBI Rin surakhs policy of 95k.Now I preclosed the HL in Feb 2015 and SBT returned me the HL documents and credited 21k of surrender insurance value.But suddenly in Feb 2016 after 1 year i received a notice from SBT Br Manager demanding premium for the closed HL a/c.I replied strongly against the unfair practice and the status of closed HL a/c stmt.But he threatened me to take up the matter with my employer and revenue recovery against me.I filed complaint against banking ombudsman and tomorrow is the hearing at trivandrum 13.04.2016…Now bank send me an advocate notice for suit for recovery and I filed one complaint in District consumer dispute forum also.SBT is making unfair banking practices to make more insurance commission.Banks are not foreseeing the customer right to foreclosure of the account.They are cheating us.Insurance is the subject matter of solicitation..I am worried about revenue recovery threat for Rs.64k premium amount…Can I continue the legal battle…Pls put your comments…..rajesh/rajeshr.aai@rediffmail.com/Trivandrum
I think you should go ahead and fight this case !
First thing, the banks have no right to bundle Insurance with the home loan and arm-twist the customer in the last stages of loan processing. It is absolutely the customers’ right NOT to buy home loan. Towards this all that is discussed here is right. But It is always wiser to go in for that additional insurance cover, just to provide for any unfortunate fatalities, so that the loan repayment wont be a burden on the family and also the existing insurance cover is not disturbed.
But the banks have now started bundling not only life insurance but all kind of insurance, for instance they force you to buy even health insurance. That is real rubbish, if you already have a good health policy to cover yourself. I recently took a home loan of 21 L from DHFL. They generously gave me a loan of 21.5 L but told me only 20L would be available towards house purchase, and the rest 1.5L was for insurance. On inquiring I learned that they had bundled four policies into that 1.5L, a house insurance, Life policy, an accident policy, and a health insurance. I fought tooth and nail with them to reduce the insurance amount from 1.5 to 0.5 and add One lakh towards home loan. Thus I was able to slash out the Life policy by half, completely remove the Health Insurance, and retain accident, home and half of Life policy. I could have got the insurance component removed completely, but I thought it wiser to have this much. But still, blood boils when I think of the way they arm-twist a helpless customer, who would have already paid hefty advances to the seller to finalize the deal.
Hi ManjunathaKS
Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also
Manish
Thanks Manish
Hi Manish,
My question is what are the charges we have to bear to take the loan from LIC housing Finance compay?
My agent is saying we have to pay 1% processing fess and Legal charges, stamp charges and etc. Hope you will guide me .
Thanks in advance
Yes, generally there are charges like that, but it caps at some maximum amount like 10k or 15k
HI,
I have applyied a home loan with DHFL and loan was sanctioned with loan amount 1460877 with insurance policy, my question is that, can i get this loan amount without insurance policy. If they force me to take this policy otherwise i will cancel my loan amount then what action i have to take at this point of time. Please assist.
They cant cancel it. Its just a tactic to sell the policy . Just dont fall for it
I approached PNB Housing Finance Coimbatore for a home loan. Loan amount Rs. 55 lakhs for 20 years at 9.75% interest rate. However only after registration of property do I know that they have clubbed an ICICI prudential insurance for Rs. 2.50 lakhs along with my loan amount. Now my total loan amount is Rs. 57.5 lakhs! I called the relationship manager and told him to cancel the policy and he threatens to cancel the loan. I have no go as all this is very last moment. I have read through all your posts and yet I do not really have a solution. In 3 words – PNBHFL cheated me.
Do one thing , once you get the policy return it back in 15 days. It will be taken back .
Also note that the guy is only threatening you. They wont cancel the loan trust me !
Hi Manish,
I am Lav Hotkar, I took Home Loan from DHFL and they made it mandatory to take DHFL Pramerica Life Insurance Policy alonfg with Home Loan. So as per their condition i had took both Home Loan along with their Insurance policy and as per your comment on GeethaRajC post i had cancelled this policy within 15 days and now received a phone call from DHFL officials stating that i should repay entire loan amount within 2 month. otherwise they will transfer my file for recovery department.
So please help me out and give some suggestion for my case.
It does not happen like that, JUst because you cancel the policy.
Dont worry , nothing will happen !
Thank you manish…..
Thank you Manish for this really helpful article. I was searching online for something like this but related to personal loans. Does it apply for personal loans as well? Because I was being forced by a Bajaj executive to buy Health Insurance & Life Insurance along with the PL. He said it was mandatory otherwise I will not get the loan. Could you please help me with how to go about this? I have already rejected the offer as I’m not willing to pay for something that I already have myself covered with.
THe guy is just bullying you and telling you , if you dont take product, he will not process your loan. Dont go for it and also complain to company about this.
Manish
Thank you for your response. Please guide me to whom should I complain about this as these guys don’t seem to be afraid of any consequences. I told the Bajaj executive that you can’t force me to buy the policies. He just didn’t listen and disconnected the phone on me. Please direct me towards the right approach.
You should first check with the branch manager and tell him to clarify why they are doing all these acts even when the IRDA has said that no cross selling should happen . Do they want to loose their jobs ?
If still things dont budge, tell them that fine, you will now get in touch with banking ombudsman and RBI on this , and they will see the consequenses. THis should be enough to make them stand ..
HI, I had taken a balance transfer of my home loan from IDBI to HDFC. With IDBI I had taken a home insurance policy for the full sum assured and a term of 10 years, out of which 5 years are over, so I still have 5 years more to go on until the term expires. I was told by IDBI insurance that they will reassign the policy to HDFC as an assignee and I needed to submit the reassignment form with HDFC’s stamp in place of assignee, but HDFC home loans refused to stamp the form saying that I need to take a policy from HDFC only. Is that valid, can they do that? What can i do to get this policy assigned to HDFC since it is fully paid.
No they cant do that. Ask them to tell you the same thing on paper in writing . I suggest you should go to IRDA on this.
Be Aware before Taking Loan from SBI or other Bank, I am writing what had happened to me and How SBI Sale SBI Life by Fraud and also Provide Loan for purchasing SBI Life without information
I request to SBI for Loan of 20-22 Lakh in reference of Builders agent to SBI Bilkis ganj Branch on the month of JULY 2014.On the date of 13.9.2014 I got a call from SBI Branch Manager for signing of documents and Submit processing fees and valuation amount for disbursement of loan. The Bank Manager told m that I am Eligible for only 18 lakh loan But I was eligible for 20 lakh loan what he have do with 211000.I am Describing it and a big fraud by Branch Manager
Sale SBI Life by Fraud and also Provide Loan for purchasing SBI Life without information : He just gave an Agreement to sign where I am eligible for 2011000.But he asked me that I have to take the SBI Life Policy which is mandatory. If I will not purchase Policy Bank will not provide me Loan. But in Agreement it is provided that Policy is provided when requested when I told him then he told me that it is old agreement and in new agreement it will be mandatory .Loan cut off was provided 18 lakh is for loan and 211000 is for policy. But here he did not told me that actually he was giving me loan of 211000 for policy .If he acknowledged me I did not take loan from Bank. And not even me even any person will not take loan from bank where he have to take loan of 211000 from bank for purchasing policy.SO he hide all those facts which comes in my knowledge after 15 months when I receiving Message from Bank for not paying installment of Home loan when I asked about message from Branch Manager he told me that Ignore this message your all emis are success and no cheque for home loan has bounced. And after 15 days he told me that the emi which is not paid is of my second loan account which is loan of 211000 for SBI Life. Then i shocked that I have another loan of 211000 other than my home loan. I was requesting him for statements for one year but he always told me that he is out of station and did not get statement from one year. I request to racpc branch they told me they are not dealing in Public services I have to take it from Branch Manager. When I told to SBI Tolll free they told the same thing they can’t give Statement. Then I have to go for conversation with branch manager now he gave me statement and told me that I can stop the policy as he paid the first premium of 41000 to sbi life insurance and he will not pay other premiums .I have to pay the amount of 41000.Then I write to SBI Chairman and the Case is under process by him and in the mean time I got call from SBI Life that if I will surrender the policy up to 25 feb which is completion date of one year of policy. Then they will return 20 k (50% of the paid amount) and I have to pay 20 k to the bank and I am not getting for what should I have to pay 21000? And now bank is telling me to sign documents do formalities for surrender the policy I am asking if they sell me home loan insurance without even telling me. He did not told me about the policy without my knowledge branch manager transfer 41 k to the sbi life policy and now taking money. Now for surrender the policy why they are asking for formalities or process when they did not sell the policy by process .And this is simply a fraud like DACOIT or robber.
My concern: (1) Bank Manager did not give me time to study agreement and just asked to Sign within 10 minutes.
(2)He has to give me time to Study Agreement and Clear my doubts
(3)Even when I raise doubt on 2 main Points he misguide me
(a)When I asked him it is written that Policy is provided when requested when I told him then he told me that it is old agreement and in new agreement it will be mandatory.
(b) And when I asked about emi of 20665 that I cannot provided he told me that I have to pay only 18-19 including policy which is fix about 19 k and
I am paying this amount from one year by means of ECS if he deducted 20665 from first month his fraud can be noticed so he is deducting 19k from one year why not he started 20665 deductions from one month.
Thanks for sharing that KetanShrivastava
My Father too had to face similar issue recently.
He opted a very small home loan under Rupees 7 Lakh from IB and it was sanctioned instantly as paper work was pretty much clear and straight forward. At the end moment pressurized my father to opt for Insurance otherwise loan would not be passed.
Thanks to Jagoinvestor I was able to deal with those guys in a very informed manner. I asked them all the questions mentioned in this post and they were pretty much clueless what to say. I mailed them in writing about the same for future reference.
We normally think they know more than us but that’s not the case most of the times.
It just took me couple of searches on the Internet to find out their method. If you are informed nobody can strong arm you in anyway
Glad to know that Prakash ..
Dear Manish,
i’ve taken a hl of 33lakh from idbi bank on june 2014. at the date of disbursement they told me about hl insurance, which is mandatory. as i am nowhere to go then i had to accept it that then. they also provide a loan for that insurance, whose emi is around 1500/- pm.
what should i do now????
please help….
You can now close that insurance policy
Hi Manish,
I got housing Loan sanctioned from DHFL bank for 26L but there
is 1.6L included for different insurance products.
My home registration is scheduled tomorrow and I have
informed several times to banker and agent thatI don’t need to insurance but they
insisted me that they will approve my Loan if I take insurance only as I don’t
have choice I have taken it and signed all the policy documents.
Now, as per your blog point No,4 , Can I return my insurance
policies in lookup period of 15days once I get policy documents ? Will I get
refund from Insurance companies ?
Could you please let me know the procedure and share your
contact number to discuss on this further ?
Hi sankalp..
Same case happened with me as well.. Today I got policy as well.. Outstanding loan of seller also got settled through first cheque… Kindly share ur no. Or call me on 9769267347
Yes, you can return the policy in lookup period . You need to contact the customer care and tell them about it. YOu will get the policy money back
Hi,
I have also got the similar situation with DHFL. The load sanction requested 25 lacs but they sanctioned load 26 lacs by saying this is insurance for loan. They have not sent any document of insurance policy or any other document for me to know about terms and conditions, EMI and total loan. My flat is registered now and I have paid registration fees.
What can I do right now? Can someone help?
Hi Narendra
I think you first need to get in touch with the company on this and later complain to banking ombudsman
Hi Manish,
I have applied a load of 25 lac to DHFL. The loan amount mentioned in letter is 24.72lac.
They are asking me to take policies ie dhfl pramerica life insurance with 142932 and chola ms amount 48482..
If I don’t take this insurance, will I get the full loan amount (24.72 lac).
Please advise.
Regards,
Sanghpal
Yes, you will get it. They are trying to bully you to take the policy and they will say all the things to scare you.
Hi Manish,
I have applied a load of 14 lac to DHFL. The loan amount mentioned in letter is 13.76 lac.
They are asking me to take policies with 76 thousands.
If I don’t take this insurance, will I get the full loan amount (13.76 lac).
Please advise.
Regards,
RAKESH SHARMA
Tell them you will not take the policies. Whatever is mentioned in the policy will be your loan amount
Hi.
I am planning to switch my LICHFL home loan to SBI. I have a quick question whether home insurance (or you can say the property insurance) is mandatory with SBI? As far as home loan insurance is concerned they have mentioned in their application form itself that it is optional and can also be taken from other providers but they did not mention anything about property insurance.
So how could I proceed if they make any compulsion regarding property insurance and home loan insurance to give me the home loan? Are these insurances mandatory? If so, Which one is mandatory and which is optional?
Addition to the above query:
I found this while going through the MITC of SBI Home loan:
http://www.sbi.co.in/portal/documents/25328/6783974/MITC+Version+8+-LTV+Changes.pdf/e242a347-9a70-49ae-a276-795f2548626d
Insurance:
“The house/flat shall be insured comprehensively for the market value covering fire, flood, Earthquake etc. in the joint names of the Bank and the borrower. Cost of the same shall be borne by the borrower”
Now what to do? How this “SHALL BE” in the above statement can be understood? Is it mandatory or optional?
Can you throw some light on this.
Thanks.
Yes, this seems to be mandatory , but its covering your house structure and contents, NOT THE HOME LOAN
Hi Manish,
I have applied a load of 14 lac to DHFL. The loan amount mentioned in letter is 13.76 lac.
They are asking me to take policies with 76 thousands.
If I don’t take this insurance, will I get the full loan amount (13.76 lac).
Please advise.
Regards,
RAKESH SHARMA
I think property insurance is mandatory with SBI loans . Go for it, its very cheap !
Hello,
Is it possible to cancel the home insurance as they handed over to me forcefully saying its mandatory.
Only if its not more than 15 days
Hi Manish, Similar situation happened to me. I was forced to buy insurance at SBI; with this policy, premium has to be paid for 5 years for sum of Rs.15k every year. Total loan amount:30L for 20 years. Policy coverage : 30L+75k for 20 years. For that they opened a separate loan account(for policy alone). Now 4 years has been completed and one more premium has to go. I haven’t pay even a single rupee for this yet, but as a additional pending loan amount. I know it’s too late but I was cheated. Can I raise complaint to RBI? I don’t like to continue with this policy but this would be a loss for me. Any option to come over this or shall I continue with it. I am confused. Please advice. Looking forward for your reply. Thanks.
As you said, its too late, but still you can complain to Banking ombudsman regarding this issue.
Hi Manish,
I have applied a load of 37 lac to DHFL. While giving the sanction letter in addition to this 37 lac they are asking me to take following policies, hence the loan amount mentioned in letter becomes 39.5 Lac.
1. DHFL Home shield by DHFL Pramerica life insurance INR 178877
2. Property insurance INR 48929
3. Family floater insurance INR 14162
4. Personal Accident Insurance INR 8436
Above all 4 items add up to 2.5 Lac. My query is do I really need to buy these sub-products of loans or I should not accept this offer.
Please advise.
No you dont need. Tell them that you will complain to IRDA on this and will get them loose their jobs !
N. Khan,
22,August,2015
Hello Manish ,
This is N. Khan , my papa had taken tractor loan from SBI branch , Odisha ,
SBI branch forced to my papa to take SBI Dhanraksha Insurance LPPT policy , one timed policy for 9 years , SBI charged ₹75000/- with our loan account for 9 years at a time ,SBI told it is a compulsory policy and forced to my papa to take policy and my papa did it , after some months my papa came to know some of people avail similar type of loan for similar purposes from same SBI branch and no insurance charged with their loan account , I was not home at that time , I was in Delhi , when I came back to home and I shocked, then personally I collected loan statement from loan holder , there is no SBI insurance policy charged with that person loan account , , I contacted to SBI branch manager , they did not listened us , finally I approach to RBI ombudsmen, case is under process with banking ombudsmen.
My papa can’t write and read any type of languages except he can sign in Oriya language only ,
Manish tell me , whether case is in our favour or not ?? , what legal action I can take against SBI branch further if I will lose with banking ombudsman .
Yes, its in your favor , but how will you prove what you are saying ? How will you prove that it was sold by force and not by agreement ?
Thank you Manish for your reply ,
I would like to add some more information here about my earlier comment , There was no agreement between bank and my father , my father signed only one debit deposit slip just like deposit slip which filled up by some bank officials in English language and in back side my father signed in Oriya language , on that slip base bank added 75000 in our loan account , charged as Sbi dhanraksha insurance , when banking ombudsmen ask SBI to present ,documents , SBI presents only that debit slip in which my father signed , there is no other documents presented by SBI with Banking ombudsmen . Manish , I would like to know your opinion and advice about the case , if in case my father might have signed any insurance form , can SBI use it against us ?? , which may have in possession of insurance company not in possession of SBI . And if SBI will do it , can I say it is the insurance company document which might have signed by my father , there is no agreement between bank and my father about insurance . Reply Me
Thanking you
Khan
If there is a document related to buying insurance which has your father sign, then you cant do much, because signing means reaching and agreeing to it .
Manish
And some of the things I forget to mention , can I present before banking ombudsmen , Why SBI forced us to take SBI dhanralksha insurance and why not to other loan holder , similar type of loan taken by some other loan holder for similar purpose just few month later my father taken loan from SBI. Is it a valid point to raise ??? Before any authority ?? .
Thanking you
Khan
from your angle its force, but from legal point of view, you wanted to buy the policy and other didnt wanted to buy. Its an agreement at the end of the day
Hi Manish
I have applied for Axis Bank home loan in Pune. Earlier, they were coercing me to take loan insurance embedded. Actually, according to them, to avail 9.85% interest rate on home loan, one requires to take loan insurance in the amount INR50K-1L. If not, they said interest would be 9.95%. I refused loan insurance straight forward and asked them to give in writing, which they didn’t.
I told them I would not go for loan insurance and asked them to give me loan @ 9.85% interest. I gave them 2 cheques INR11,400 for processing fees and INR570 for other charges and clearly mentioned not to encash them if they can’t make it 9.85%. They agreed to it if the rate would not be lowered to 9.85%, they wont encash the cheques.
After a week, I got an sms from my bank for deduction of the above mentioned amounts, without any intimation from Axis Bank on the rate finalised
Weeks passed and they reached out to me this time coercing for property insurance of around INR35K. They said this is mandatory and they have given me in writing. But, they did not mention the amount in mail, only verbally asked for around INR35K.
Just for a second opinion, I approached Axis Bank Bombay branch. I was told if anyone pays INR11,700 as processing fee, they are not obliged to take loan insurance. There is fee waiver scheme from Axis Bank. According to scheme, loan insurance is mandatory for those who have opted for waiver scheme and they would be required to pay processing fee of only INR2,850. Also, the property insurance was quoted around INR8K.
I understand the pressure under which an employee of private bank has to deliver, but such an ambiguous process should not be followed.
Need your advice on how should I avoid this property insurance of INR35K (Pune), whereas as per Bombay branch the same is around INR8K
Also, in a general public interest, what could be my legal course of action against these white collar goondas
Thanks for your time!
Best,
P
Complain to banking ombudsman . Thats the only thing you can do apart from complaining to grivienace cell of the bank
I had taken home loan from DHFL. At the time of taking the loan, they had verbally told me that HL insurance was mandatory. At that time, I was not so aware, so I took it. I was not even aware of the free lookup clause. Now when I am trying to surrender it and go for a term insurance, I got to know that the surrender value will be about 60% of the nearly Rs. 300,000 one time premium I paid. I still think that paying for a term insurance vs EMI for the insurance will be more beneficial. However, I wanted to know if these is any IRDA regulation that defines how the surrender value for an HL insurance should be calculated.
Ashish
There is no IRDA guideline on that. Each company decides theie own !
I have taken a HL from SBI in 2009. The loan amount is 13.62 lakh and after paying the EMI regularly the present balance is 8.80 lakh. Now the bank is forcing me to insure my property for the current valuation and they say this is mandatory. They have even sent me a letter station that if I fail to produce the insurance within this month, they will do it & credit the same in to my account. Please inform is that mandatory? If securing the loan is the primary point here, my office have already assured the payment if I fail to do so.
Hi manob ghosh
Bank cant do this forcefully if it was not mentioned in the agreement . Check with them
Last point is best option. Return Policy during free look period. I have done this when bank insist me to buy ULIP for availing bank locker facility.
Demand insurance policy paper immediately on making payment and keep track and that you receive the same with 8-10 working days.
Hey Yogi
Thanks for sharing your experience with all of us. It was a great learning.
Manish
Hiii,
I took home loan from SBH around 8 lakhs,Manager insist me to take life insurance policy which i have to pay for 5 years premium of rs 12000 per annum.for that bank sanctioned extra 95000 for paying this policy premium.
My question is how many amount will i get from bank whether only 8 lakhs home loan amount or 8 lakhs and 95000 premium amount sanctioned by bank for life insurance..can i get that 95000 rs for utilization for my personal purpose with home loan amount.
That life insurance policy is most a term plan, so you dont get back anything in that!
Hi Manish,
Can you explain what happens to the insurance we took when we transfer the home loan from one lender to another.
Say for example we took 28Lacs home loan and along with 40k insurance in axis bank.We want to switch to SBI for lower interest rate. In this case will the insurance will also be transferred to the new bank or do we need to take a new insurance ?
Sudha
Sadly, it becomes null and void , but its as per http://www.nitinbhatia.in/home-loan/7-reasons-why-you-should-not-buy-home-loan-protection-plan/ . I still need to find it myself !
Hi,
I remember getting some Home loan insurance cover when we took our Home loan from IDBI. We were told this was to be taken to insure the house and the borrower. In case of any unfortunate incident, the loan amount will be paid by the insurance company and the family is not burdened on it.
An article covering this aspect.
http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?autono=893877
If you take with with your own wish ,then its fine !
pls reply since I am being pressurized by bank officials to bbuy this credit protection plan. The amount of 1 lac plus ,wat they are saying, would be taken initially and later would be deducted from my loan amount in monthly instalments.This would increase my emi by nearly Rs.2100.
Dont take it . Tell them you will complain to RBI on this
Manish
pls tell if it is necessary to buy credit protection plan for loan against property
No there is nothing like that !
Point to be noted before handing over your Financial Documents for availing a Housing Finance Loan.
Before Handing over all your Certified Financial Documents to the Banker, take a confirmation that in the event of rejection of your case, it will be Bank’s responsibility to return back all your Originals.
Other then the Housing Loan & Interest Repayment obligation there will not be a surprise debit levied upon you.
a. Acceptable Cost
i. Property Insurance 1 yr Rs.1000/- & Max.Rs.5->7000/- for a 10 yrs tenure if you are paying in advance while taking disbursement.
ii. Understanding the Penalty Charges for you failing on timely repayments.
Non Acceptable Cost.
i. Home Loan Insurance (Insuring the earning member-despite of him already being insured. It is annually around Rs.12->15,000/- & for 5 yrs it is 72->85,000/-
ii. Financial Kickbacks to the Sales Executive OR the disbursing Official Teams.
Malafide Practice followed by Housing Loan providing Banks (My personal experience with leading Private Sector Bank).
From the day of submitting your Property Documents with a Housing Loan providing Bank, processing of Housing Loan takes maximum of only 12->15 working days only. Whereas for a Balance transfer (Existing Loan Transfer from one Bank to another for saving Interest Cost) case, it should not take more then 10->12 days. Anything which is delaying the process, should give you sufficient reason to doubt the malafide intention of the Bank. With a intention of rigging up their revenues, Banks are at the last minute of disbursal asking you to avail a Home Loan Insurance which cost u a additional burden of Rs.70->95000/-. They are only verbal on this & at no point they communicate to you in writing. In their final disbursal Offer letter they only mention about that you have opted/asked for a Home Loan Insurance. Such cross selling of Home Loan Insurance Product is strictly prohibited by RBI. For selling 1 product, a Bank cannot force upon a additional revenue earning product to the Customer. These Banks also go to the extent of pointing out some dubious drawback in the Property Documents & despite of getting legal clearance, they keep the case pending stating that the delay is because their Branch Manager has not cleared the case citing XYZ reason. But at no count, they will give you a refusal letter as they do not wish to lose a Interest paying customer. It is not 1 of the event, but has been a common arm-twisting technique followed by most leading Banks. Desperate Home-Buyers do spend any were between 15->30 days time with a Bank for taking a disbursement. They are compel & cornered against the wall for taking such a huge financial burden, as they do wish to lose the deal from the Builder/Seller.
Perfect Solution.:
1) Make it clear on day 1 to the Bank that you are not going to take any such forcing Home Loan Insurance products & ensure all costs are known to you.
2) Keep a parallel Bank option also – only drawback it may reflect as a Credit inquiry in your CIBIL report.
3) One can opt for a separate Life Insurance Product from LIC, equivalently covering the earning member to the extent of 110% of the Housing Loan which has a relatively a smaller Insurance Premium outgo. Consult your Insurance Agent.
Thanks for sharing this !
Hi Manish
The article has proved a boon to many… thanx a ton!!
Im taking a home loan of abt 50 lacs from LIC.
Can u suggest which home loan insurance i shud take and for how much
Thanx
Vipin
If you are keen to take HOME LOAN INSURANCE, then take the one they are offering, but I suggest you take a term plan either, it will cost you very less !
Dear manish,
Same happened with me,i have applied for H.L with axis bank,they are saying life insurance is not mandatory.but you have to buy building insurance that is mandatory for 7 k for 20 years tenure .even he showed me a sanction letter belongs to some other person mentioning this is mandatory .and you can get it from any other ins. company. if you fail to do so within 15 days we will do it.and you have to pay. please suggest as i have given all the docs and cheque for processing fee.
hmm.. As far as I know its not mandatory, but considering its 7k and property insurance, i would say go for it for your own benefit !
Thanks for the reply Manish. I was wrong, it is not for Home insurance. Today i received a form to sign in and i read it as Bajaj allianz group credit protection plus which is a life cover for particular term. That is why I have been asked to pay 12k and another thing i noticed is that this life cover will be linked to the master policy number owned by Vijaya bank which means I will be a member to that group.
Also today i went through the loan sanction letter which says above insurance has to be taken along with the home insurance which will be only after complete construction. Amount for home insurance is not yet mentioned
So, I will have to buy two insurances from the bank to fulfill their requirements. I don’t want to be a easy customer, so i have complained vijaya bank’s customer grievance cell that my branch manager is forcing to go for both. Let’s see what will be the reply from them. I will update.
Meanwhile, can someone share your thoughts here which might be helpful for me.
Also tell them you will file a complaint with banking ombudsman and also with RBI on what they are doing !
Manish
Hello Manish,
It was really an eye opener for me. This article has boosted my confidence level, I have availed 12 lacs of HL from vijaya bank. Branch manager disbursed first cheque for 3.5 lacs and today he asked my father to go for home loan insurance by paying 96000, if failed to buy insurance then further cheques will be stopped.
After reading this article, I asked my father to take a letter from BM to escalate his demand of paying insurance amount. Later, he politely turned the plate and offered different plan saying atleast an insurance of 12000 should be paid which is a one time payment and it is mandate across all the bank. I presume it is for house insurance and not house loan insurance like first one.
Now should i go for that plan or still find ways to get rid of that too??. Please share your thoughts there..
Thank you in advance.
Hmm .. yea you can go for that insurance of 12,000 , its for your good only . But I am not sure if even that is mandatory by all banks , it might be mandatory by Vijaya bank, but better ask the manager to show you documents for that also , I got home loan from HDFC Ltd and I have not bought any policy !
Hi Manish,
This article is an eye opener for so many people who do not know such malpractices adopted by banks..i am a CA and during the audit also we have found so many irregularities take for eg..bank debits the customers account with bla bla charges even if it is a wrong thing and their circulars do not contain any such provisions for the charges(or they charged higher amount than specified in the circulars)..so i advise all to review their bank account statements once in a month to see if the charges that are cut by banks are unsual…atlast we have told bank to credit back those charges …we have recovered atleast 20k per branch of XX bank in rural areas…
Thanks for sharing your views and experience on this topic Maulik 🙂
Is it possible to cancel the policy.?
ICICI said they just need NOC.
hai manish, recently I had applied for HL from SBI.They are insisting for insurance policy.we are 3 persons as applicant.we are morgaging and of value more than 20 times of land value. still the are telling to take insurance . guide me further
They can insist, but are they saying that its compulsory ?
yes, they are telling it is essential to take insurance
Ask them which circular talks about it , because you have read on RBI website that cross selling is not allowed , tell them you will find out by Filing a RTI ! , tell them these things and ask them to give you in writing on the company letter head . They will not .
They are just putting pressure on you so that at the last minute you do not deny and fall for it . They get commission on the policy .
Show them this article print out and ask what they have to say about it , ask them that you want to meet someone senior or just ask them to contact me . You can get them connected to me on email .
Manish
Hello Manish,
My loan is about to get sanction with SBI. I am willing to take property insurance from SBI itself. Can we decide on the SI needed for the property insurance or should it by default be the sale agreement value of home? In my case, the total flat value will be 48 lakhs and I am taking home loan for 35 lakhs. Can I decide to take property insurance for 35 lakhs?
Regards
Sreejith
Yes you can take for 35 lacs, but make sure you properly cover yourself for a bigger amount which can also benefit your family for other things
Hi manish,I read this article just now,My loan sanctioned by SBI(max gain) of 20L,My agent has taken SBI Life rinn raksha policy ,today I went to the bank for the document process,the person of insurance told us that its not mandatory ,but ur loan sactioned on this basis.he had shown us pending files of loan which are not sanctioned as they pepl ddi not take insurance .We gave him cheque for 8000Rs .But he did not handle any policy document.Our agent has told us that if you have enough amt of insurance thn no need to take but we have insurance of only 6-7 L of LIC.So we told him to take a insurance .WE have to pay for 5 yrs means it is near by 40K.WE have selected an option in which they debit the amt from bank account directly every year.is thr any option now to stop or any othr pls tell us ,As we are from Gujarat nd this is first time so we dont knw abt this.Currently In pune
If the amount is not debited from your account, then you can stop this . talk to company on this . but i think if you do not have any insurance, better go for it .
Thank you so much Manish for this article. I am applying for the home loan from Axis bank. I have just submitted my documents to them, so haven’t had any problems yet. But now if they ask me for any type of compulsory Insurance, I have no. of answers to give them :).
Thanks Again
Good to hear that !
Hi Manish,
Couple of months back I received approval for SBI Maxgain Home Loan (RACPC Wakdewadi, Pune). The SBI guys out there also forced me to take Term Insurance (SBI Term Plan Only); only after I insisted for more than 2 weeks they agreed to accept copy of my existing Metlife Term Insurance Policy. In fact I didnt “Assign” the policy to SBI. Later on FINAL day of Loan Agreement, SBI guy forced me to opt for Property Insurance from “SBI Only”. I made huge noise out there and also escalated the matter to higher ups seeking SBI/Govt Notification for the same. But they were adamant and later agreed to Property Insurance from even other bank. I found that SBI has cheapest Property Insurance plans so I had to opt for it.
Then one SBI Officer told me that I have the option to go for Property Insurance from the date of Flat Possession (Dec-2013) by giving a post dated cheque (Rs 10k). So I went ahead with the same.
Since the cheque is not deposited by SBI till date, please advise the option available for me as I dont want to pay for Property Insurance.
If your loan is already approved, better cancel the cheque . If they cant give it in writing , then you have all right in doing this.
Hi,
Firstly Huge thanks for sharing so much of valuable Information.
We(myslef and dad aged 50) had a 28L home loan form IDBI, as usual they forced me to buy insurance which costed 80K for 5 years.
we have cleared the loan in 4 years, i came to know we can get the premium paid back for the remaining term form the Bank of baroda manager, however when i called up IDBI they say it cannot be returned, and only if something happens to th borrower, they will give the sum assured 28L to the borrower is this true?
If not i would like to know the legal options i can exercise to teach them a lesson, so that people are not cheated again.
Thanks
I think its too late to correct this mistake .
Hello Manish,
SBI has recently launched e-term plan your review about that. I am planning to go for it, your thought please.
I think its iShield .. I am not sure what will the review contain . Its more of a new term plan in market .. thats all
Good day Manish,
Wishing you & your readers a happy & prosperous New Year 2013. Its been a while I have logged onto your website , hence the lateness. 🙂 .
This particular article concerns me in a big way & if you could advise me I would be grateful. I am in the process of applying for an ICICI home loan for nearly 1cr. ICICI has offered me their Liability cover product – “Home Protect” which according to them is exclusive for their home loan applicants. Details of the proposal are : Coverage: The product offers a complete Death coverage –
1) Accidental Death,
2) Natural Death,
3) Murder &
4) Suicide.
Coverage as follows:
Loan Amount : 1 Cr
Tenor: 15 yrs
Premium : Rs. /- 2,22,800 (Covering Applicant) which would be added to the sanctioned loan amount.
I have clarified to them that I am under no compulsion to buy this and they have agreed to the same ( I guess a little bit of financial literacy goes a long way). I already have a term plan for 50lac from LIC for which I pay an annual premium of 16000/- odd rupees. The premium amount is high as I am involved in a high risk activity professionally ( as per their norms). Now looking at the term plan offered by ICICI it seems my annual premium works out to be in the region of 14000/- for 15 years for 1cr. Here lies my dilemma, whether I should voluntarily accept this term plan offer or go for an additional ‘outside’ term plan where my premium would be high for the same value which covers the loan amount.
The ICICI Mumbai home loan department have been helpful & importantly understanding and till now have given me no reason to feel pressurized.
Do let me know your thoughts on this. I would like to clarify that I work on oil rigs & platforms, hence the high risk profession.
With regards,
Aditya
It does not make any sense to pay one time single premium , Note that you cant just divide that number by tenure and say tht per year cost is Rs X , because the value of money also needs to be considered (Rs 1 lacs paid for 10 yrs in start and Rs 10k per year for 10 yrs are not same) .
So better take a term plan from outside and have a CHOICE to stop it in between if required . Just see how much you can get on yearly basis as interest if you put that 2 lacs in a FD 🙂 . Cant you pay the term plan premium by interest on it itself !
Manish
Thanks Manish
Thanks Manish for such a nice article. I am a live example of this topic. I am in process of switching my home loan from Bank of India to SBI. After almost 4 to 5 months of delay, I was being asked by SBI to avail Run-Raksha Insurance or to assign one of my existing insurance policies. After escalating this point with SBI customer service officials and IRDA, finally my home loan was processed further without having to avail or assign any insurance. But, unfortunately, the loan transfer is still not over with lethargic approach and pathetic service by SBI. Just thought to highlight the fact that if a proper channel is used, we can get rid of headache of insurance policies.
This happened to me. I told the manager i will instead invest in mutual funds owned by your bank which he readily agreed and sanctioned the loan. Once the loan was sanctioned he never got back to me to invest in mutual funds 🙂
Great to hear that .. it proves that these are just the tricks used by these people and they are not so serious about it !
Hi Manish and all,
Please help me out of my siutation here,
I have taken loan for Plot Loan ( vacant Land ) from SBI and as usual i was also victim of this fraud people. I took loan Last year Jan 2012. That time when manager told at the end that i have to take this loan compulsory , I argued saying I have TERM insurance close to 1 crore , then why do i need it and i am enough insured. But we had a personal urgency to process quick , so Manager promised me after my hard argument that she will talk to head branch and try to see if i get exempted from this SBI RIN RAAKSH insurance. But on final day when i meet her of day registration she said she could not help me much and in that location of where I am buying SBI is the *only* branch and builder was only associated with it and in pain i went ahead.
My loan amount was = 20 Lakhs and SBI sanctioned = 34,000 as insurance approved amount , so total my loan amoutn = 20,34,000.
For insurance amount = 34,000 , it will be pain in 5 installments to SBI insurance on behlaf of me by SBI bank. So First installmnet = 6600 was paid by SBI bank ( since in stupidity i signed) and original insurance doucment was sent to SBI bank and receipt was sent to me by SBI insurance.
If Manish could have posted this suggestions 1 year back, I could have been saved. After looking at this Manish and other’s suggestions here, I called Insurnace people and asked I wanted to cancel the policy.
I was surpsrised by SBI Insurnace team answer that : I can not return myself the policy ( i don’t have original too , it will be kept at SBI bank as security) and I have not taken policy from them directly. Policy was taken by Bank after my consent. Since I have lost the fight with Bank that 15 days free lock period option. Now in another 15 days my second isntallment amount will be deducted and policy will be renewed by bank. Now what is the option do you suggest me to get out of this fraud. ( Surrender is what i heard ). But that too Bank has to do for me and I have to fight with bank for this surrender. Any loss in surrender do I have to bear or SBI bank will bear If I tell Manager that I will be taking this matter to RBI and banking ambuds ?
Regards
Kumar
I think the bank as “ASSIGNED” it to them selves . ASSIGNMENT is a term in Insurance, where you declare that any benefit out of it should go to this person , its different than nomination , I think the control is with SBI bank now . While I would still say that you contact RBI and also use RTI to find out what needs to be done in this case .
Another option is to also let it go as the amount is quite small compared to what we generally hear . I am saying this only because you can concentrate on more important things and now let this one be like a lesson to you .
Take your pick !
Manish
Hello Manish,
Some banks charge insurance for Personal loan also, Is it a right practice from bank’s to charge from the loan amount itself? Is it compulsory?
Thanks,
Penchal
No, its not
Hi All,
My friend is also facing this issue when taken LAP with axis bank. He told me that he got a loan of 14lakhs, while the sanctioned amount is 24K more than this. That 24K gone towards 1 TATA AIG and 1 MAX Newyork Insurance. What to do now as the amount got disbursed today? Can the bank still cancel the policies or Do he have to wait to execute option 4?
Thanks In Advance
Better look at option 4 . Once the policy comes to your hand , better cancel is within 15 days !
Thanks Manish.Good article.I have insited for MF from bank while taking home loan.You can withdraw after 6 months and no commissions /exit loads are involved like ULIPs
Thats great ! , MF is fine I would say !
Surprised to hear such cases. 5 years back I had done home loan transfer to HDFC. I was approached for buying ULIP policy but that was optional. I did not face any issue in getting the home loan cleared.
But good that I am aware of this.
Regards
Atul
Life was better those days and you met good people !
I am currently taking a homeloan from SBI. I have some TERM insurance from SBI Life. They are asking me sign the assignment form which will assign some portion of the Insurance to SBI. Should I do this? Appreciate your inputs.
Yes ,that makes sense .. they might want a security that if something happens ,they should get something out of your term plan ! , do it
Thanks Manish … I have done that …. Now, I gotta go and buy an online term insurance plan before my next birthday .. will do that as soon as my this week or next ….
Great !
Happened with me recently. I have taken Home loan from DHFL (one month back) and they told me that its mendatory to have Home loan insurance to get Home loan and they offered me Icici pru Home assure policy which cost me around 37K.
Two days back i got the policy document. Can i cancel this policy now? Can DHFL have any objection or problem on this. I am not sure if they are having any rule in their loan agrement to have this policy.
Pl suggest me should i go ahead an cancel this policy ( i am already having sufficient term insurance which can take care of my Home loan).
Cancel it , you are into the 15 days lookup period , you can cancel it and get back all your money . They should not create much issue now ! , make sure you have proper records that you applied for cancellation within 15 days of recieving the policy , just to make sure you are stronger by the records and proofs !
Thanks Manish for your reply. I am working on it..
Hi All
Please do not take any loan from DHFL.
1. They will force you to take insurance from them stating that its mandatory, but they will not put it in writing.
2. They will sanction the loan. You will make your arrangements with you builder then go to them for agreement. Then they will tell that due to some issues or some nonsense reason your ROI will be increased. You will left with 2 choices. Cancel the loan or agree for the new ROI. As you might have other commitments you will be forced to take the loan. Be careful them.
Happened to me as well but not with HL though with PL, when bank rep. came for signing all docs. they bought the HDFC ERGO Policy as well and asked me to take a policy to cover you PL.
I bluntly said to him, I don’t need any loan and denied signing any policy doc. He agreed at that time and my loan got disbursed with 7 days but when I saw the credited loan amount I was shocked. HDFC deducted some 1500/- as premium and within 2 days I got the policy doc as well.
I ringed to HDFC Loan dept and asked how you deducted 1500. He said it’s mandatory to have insurance against your loan. I then asked the loan dept guy to connect to his manager. I spoke to his manager and said return my 1500 within a week or get ready to face consumer court. Obviously he was trying to convince me but I was unmoved. Finally he agreed to return the premium amount and within 1 week I got the Cheque of Rs1500 🙂
Great 🙂 .. This is nice experience .. Its very simple, PL is a unsecured loan , how can they ask for security for that 🙂
Last month I took home loan from ICICI, I faced the exact same problem. I directly called the Branch Manager, he told its mandatory, I replied him that I am going to send an email to ICICI senior managers/CCing RBI to confirm about this. With in two days he issued me a new sanaction letter without home insurance.
Hi Balaji,
I too recently got my loan sanctioned from SBI ( Max gain ) from 4th block jayanagar Bangalore branch. I am surprised they did not tell you in advance about the Rinn Raksha Policy for which you have to pay for 5 years. They told me exactly the same but I told them that I have a Term insurance from Aegon Religare for 1 Crore. I wanted to take 50L only but decided to take term insurance for 1 crore thinking it will cover for my house loan of 40Lakhs too. Initially they did not agree and said that I have to take insurance from them. Later they asked me to write a letter to Bank manager about it and after I gave them the letter, they sent it to higher authority and I got my loan approved. It just took 1 week extra but that’s ok right :).
All I wrote in the letter is that I have a term plan that ensures that my nominee will be able to pay the outstanding loan amount easily and hence I do not wish to take any insurance policy form bank. Thats it. Since it was in writing, i guess they could not do anything.
It is much better to take a term policy than bank insurance as the amount received from bank insurance is equal to outstanding loan amount which keeps reducing all the time. The bank even tried to tell me they both are same for which I said that for them to be same, I will have to buy their policy and die immediately 😛
So, I would suggest you refuse the bank policy and get a term policy form any insurance company you like and just provide proof for it to SBI by giving a written letter. You don’t even have to “assign” the insurance to banks name. Just the letter.
i too am a victim of this kind of pushing of insurance which actually is of no use to us as end user infact it helps the person processing the loan and his agent who namely is some family member of the person processing the loan.
i was emotionally blackmailed saying that my loan eligibility was considered looking into that i shall be purchasing the insurance which actually does not cover even 10% of my actual loan amount.
i sometimes really am puzzled at the type of methods used by loan processing agencies.infact i would confidently say the bank is also a party to this kind of illegal selling of insurance.
in my case the bank in question was ICICI BANK which i had previously heard of such mischievous operations by their employees. but due to circumstances we also fall prey to such malpractices despite the fact that we do not approve of such behavior from the bank.
i liked ur 4th option that is returning the policy during the free look in period. as here since u have been tricked for buying the policy u too can trick them by returning it back.
my policy amount looted by the bank was Rs 35000 which i shelled from my pocket just to satisfy the officers processing my loan.
if this article would have come earlier i would have saved this money
regards
anil
Why dont you now complain to banking ombudsman on this … I am sure some fruitful results would come !
I can’t stop myself from thanking Jago Investor & all its contributors.
At very right time I received newsletter titled:”4 things to do, when you are forced to buy a Policy with Home Loan !”.
I am facing similar problem with SBI HomeLoan.Please help me with this:
SBI initially sanctioned maximum eliglible Home Loan amount after going through my earning history & potential including all available Form 16 with me.
But now at the time loan disbursement they are citing reason that I dont have complete two financial years Form 16& to compensate that I need to take SBI Rinn Raksha Insurance policy without which they will not disburse loan..
After going through above thread I come to know that it is not mandatory to avail Insurance Policy however…
please help me in knowing that,is it really necessary to have full financial years Form 16, at least of two years employment to get Home Loan from SBI?
I am helpless in producing such forms because my total work experience till date is 1 year 8 months.
Waiting for everybody’s valuable suggestions.
Pushkar
No its not mandatory like that, if a bank is ready to give you home loan on condition of you taking a policy, then it means that you are eligible, they are just exploting your “needy” situation . Just tell them on face , you dont need loan from them because you are getting it from other bank , and they should come back in no time ,trust me .
Hi Manish
I recently (just last week), I took a home loan from SBI (Max Gain), they forced me to take this Home protection plan costing me about 22K per annum. They said this is mandatory, else my loan won’t get processed. If I did not take this, I had to produce an “guarantor”. I had no choice, because they told me at the last stage of loan processing. Now they say I have to pay for a minimum of 5 years. Before I knew they have this agreement copy stating the EMI amount which also includes this premium. Also, I was not told what other options of Insurance I have as an choice. I would have gone for this if I was a given a proper information and also the choice of plans. I guess I have stuck to option of keeping this for 5 years.. do i have a choice? The answer is “NO”.
You said it happened last week , did you get your policy document in hand ? Because you always have that 4th choice , return back the policy within lookup period and get back your money for premium . In worst case, just leave the policy like that, and dont pay any more premiums , also complain about the bank with banking ombudsman
Recently, when I transferred my home loan from IDBI to SBI, I faced the same issue. The branch manager explained me being IDBI different entity, what if it does not provide the documents after loan disbursement, I needed to provide third party guarantee for the period of loan disbursement and the documents released by IDBI to me and submitted to SBI. Alternatively, he asked me to take RINN RAKSHA POLICY from SBI LIFE. It took more than 4-6 weeks to convince the branch manager to drop the clause. During this period, I asked him to showcase one case where SBI has collected third party guarantee having LOAN TO VALUE RATIO is less than 40% and EMI to take home salary ratio is less than 36%. One of the officer from the same branch explained me on the phone that this was required to meet the targets. She also informed me that irrespective documents provided by me they would I did not get the sanction letter. At one point of the time the branch manager informed me that SBI need to cover up the low margin on housing loan by selling insurance policy only. Finally, I had to show him the draft mail ready to send IRDA complaining about illegal practice of insurance selling by SBI LIFE. After reading the draft, he made me to speak to one of the loan officer at RASMECCC, VASHI, who agreed that it was OK, even if I provided the photocopy my existing policy. Surprisingly, then after not a single officer in the bank was interested to know whether the policy is in force or not. All those issues related to non release of documents by IDBI or loan default vanished in the air. Then after, I spread this message to all my family and friends and they used the same idea and got loan sanction from SBI.
Very nice one Manish .. You really acted as a responsible and powerful investor ! .. great one !
Very helpful info Manish, I also faced same problem with SBI , due to lack of information I dropped the idea of loan transfer. But now with your experience I will pursue it again.
Thanks
Great ! .. please do !
If you have a term plan in place, why to buy the insurance from the banks considering they have the safety of getting the loan repaid.
Kindly any experience on this matter?
Yes, you dont need take any insurance policy , these are just marketing gimmicks !
Manish,
Wonderful tips to avoid paying for bank’s safety, I have successfully used another tip.
I said to Bank Manager that “I have fixed deposit and saving account with your bank, are you willing to take insurance on that so that if bank goes bankrupt, I will not loose money.” As Bank Manager does cannot do this, he stopped forcing me for the HL insurance.
Great one ! ! ..
Actually, savings accounts are insured up to Rs 1L by the government.
I am an ex bank manager and I fully agree with the 4 options suggested. I am of the opinion that the 4th option is disastrous… you will understand why as you read on. However I would like to put forth a possible reason why the bank asks for such a policy.
If the borrower is in his late 20’s or early 30’s the argument I am making may not be valid but for a borrower in his late 30’s or early 40’s, the probability of untimely death of the borrower is high. If the borrower is the sole bread earner of the house, the situation becomes much grim with his death. His survivors are saddled with extra burden of repayment of the housing loan apart from meeting day-to-day expenses. Here is where the utility of the Life Insurance comes in the picture. A policy with death benefit (DB) equal to the loan amount will not only help the survivors repay the entire loan, but also save them some money for survival. Also in absence of the policy, the survivors stand the risk of losing the shelter which is attached with some emotional values. the bank will simply take possession of the house and will dispose it off to recover its dues. What the survivors lose can not be ascertained in monetary terms.
Keeping this in mind, for his own safety, the borrower should take an insurance policy. What type of policy is totally his decision. What is advisable is a TERM policy where a 50 lac term policy is available for as low as 12K p.a. i.e. less than 1k p.m. for a person in late 30’s. Yes if the bank insists on a endowment policy or a traditional product, the bank is not justified or rather the bank is misselling the product. However buying a policy at the time of taking a loan is in the interest of (not the borrower) but that of the survivors.
So my advise to all prospective borrowers is that …. even if the bank does not ask for it… take a TERM policy on the borrower’s life.. it pays in very unexpected and unfortunate situations.
I know I am the only one with contrary view but give it a deeper thought and you will not undermine the importance of this.
I actually agree with you on the need of a sufficient life cover which also covers the house loan . Totally needed . And if a bank can explain it to the customers I am sure a lot of people will go for it , however here banks try to sell useless ULIPs and unsuitable plans , and we are against that ! .
Also the logic is correct, but there is no RBI rule on this and cross selling is not encouraged as practice. Overall I my thoughts are aligned by yours. Thanks for acknowledging !
Completely agree with Manish. Banks can explain the need of term insurance in such cases, but can sell ULIPs against home loans.
When I switched from ICICI to BoB, BoB not only offered lesser ROI, but has also covered my insurance upto the amount of debt for the tenure of the loan. More importantly, I am not paying anything extra for this term insurance.
I have also heard of some other banks asking for getting a term insurance to secure their loans in case of untimely death of the borrower.
But here, you are wrongly justifying banks selling ULIPs.
Where am I justifying ? I am myself against it !
I meant…Mr. “No buddy” and not you 🙂
Dear Mr. Mukesh….read what I have written carefully…. I have said that the choice of policy lies with the borrower and that if the bank sells endowment or traditional product it is not justified. I have not said a word about ULIP. All I am advocating is a TERM policy that too for protection of the survivors. I am sorry, if I sound anything else than this. Also I may add that if there is already a existing TERM policy then there is no harm in assigning in the name of the bank while taking a loan rather than taking a new policy. I am in no way justifying a bank…. not in the least. This is the best way to avoid confrontation with the lender.
My family income is 12 lacs per annum Cash Salary & Rent Income + asset value growth of average 8-10lacs per annum.
Assets 1.75 Crs. 2 flats in Mumbai, gold, LIC Insurance Covers,Fixed deposits & so on. & Liabilities only Rs.38.2 Lacs. I had requested for BT + Topup facility from IDBI totaling Rs.45 lacs. Bank is forcing upon me a HOME LOAN INSURANCE policy. 5 yrs premium will be Rs.70-75000.
Is it justified…… Pl be objective. Do not convince me as a Banker. Should I drain my Cash resources of paying premium or should I invest this amount in SIPs.
I guess you have already read this article .. they cant force you .. tell them you dont need a loan and you will complain to banking ombudsman
I had not exactly the same, but similar experience with ICICI:
In 2008/09, when the home loan interest rates had peaked for existing customers (new customers were still getting loans at lesser interest rates), I asked ICICI why are they not reducing the rates. The response was that if I buy a ULIP of 50K premium, they would reduce the interest rate by 0.5%.
Instead of staying with ICICI, I just switched the home loan from ICICI to BoB.
Haha .. good one .Their one idiotic reply costed them a customer and so much of trust!
I taken a HL from SBI and there was no such compulsion at the time of sanction. After paying 2 EMIs of my HL, one day they issued a policy on my name and deducted premium from my account. All this was without my consent. When i inquired, i was told that for a Loan of 6.5 Lakh, Only Rs 650/- was charged as premium and this is only once ( not per year) and they promised that in case of collapse of building structure due to any natural calamities to my home, i need not pay EMIs further. The same was written in policy letter. So i accepted the policy and did not bothered about Rs 650/-
Ok so that was HOME insurance , not home loan insurance which is related to your life . I think its a good idea to pay Rs 650 for that !
So HOME Insurance is OK ?
I paid some 11000 for it. if its not mandatory, I can surrender it.
I don’t want self in business of advocating banks but one thing is not clear in above case of SBI branch manager-whether it was Home loan protection Cover or any other insurance policy ?
If bank is asking for Home Loan Protection Cover Policy then I don’t think its bad idea.
Yes the bank manager was asking me to take a Home loan protection cover. But why should i take that ? Its always better to go for a TERM insurance for the amount of loan you have taken. Its very cheap 11,000 pa (SA 38 L, Permanent or partial disability rider for 38 L,Critical illness cover for 7.5L). Moreover if something happens Sum assured – Balance principal will go to my family. Even if change my loan to some other bank, the term insurance will be hassle free.
If i take home loan protection cover (Just a different name for term insurance which covers home loan)
Its mostly single premium policy that means you are struck with it, You can’t move to a cheaper one and even if the service is poor nothing can be done.
I am not sure what will happen to the policy if you change your bank (Do you need to buy one more home loan protection policy from your new bank???)
if something happens only the loan amount will be paid. If something happens when the loan amount is a meager 1 L , just 1 L will be paid nothing else !!!!
Hi Sreedhar,
I think if major part of Term insurance went off paying the loan then it won’t serve purpose of term insurance.
Now a days,insurance companies are much stricter about term insurance plans and its tough to get cover of more than 10-12 times of annual income..so better to cover loan separately.
But, one should agree that such things are individually customized and in real life we need to optimize the things.
We are talking about LIFE Cover policies
When i took a loan from State bank of Patiala, i too was asked to go for a compulsory ULIP/MF/Insurance policy. When i told the manager that i couldn’t afford to long term commitments as i have already taken care of insurance and investment needs. So the manager has to rule out ULIP and MF. He was forcing me to go for an insurance. The cost is 115,000 (Home loan was for 38L). I told him clearly that I can’t afford this much money. So he was ready to club this amount with my home loan. I was shocked, Since my effective home loan would be 39.15L.
I googled and found that , there is an option called “Assignee” in term insurance, By which you can take a regular TERM insurance and make the bank as assignee. So that if some thing happens, The bank would get its money and the rest will go to my nominee (Sum assured – Balance principal) . The manager pretended that there is no such option available. When i showed him the assignee form, He could not force me further. The only compromise which i had to take is to go for Offline term insurance with SBI Life (But SBI life has many rider options which was not available with other online plans)
One more thing the bank manager are insisting is to go for mortgage deed (The bank call this as MOD) in favor of the bank. The manager says this is for the banks safety. This will cost 30 – 50 K in the form of stamp duty and registration charges. If you do this, virtually your loan will be tied up with the bank. It will be a tedious job , if you need to switch a loan to any other bank. The best part of the deal is you need to bear the expenses for “Bank’s safety”. I told the manager i am ready to go for MOD if the bank bears the expenses. I am not so rich to spend for banks safety 🙂 . Each time I visit the bank, the manager will talk to me about MOD, But some how I am avoiding it 🙂
Shreedhar
Good idea .. this thing called ASSIGNEMENT is really a nice thing one can use for their home loans , I will do a detailed post on this ! . Did you use this ?
Yes Manish i have used it. It would be great if you could also touch upon the mortgage topic 🙂
Thank you for sharing about MOD. we appreciate that.
Could you please brief what is MOD and is it done automatically done by bank if we do not mention?
because i have taken a Homeloan from IDBI bank and would like to understand further.
Thank you.
Hello Gopikrishna,
I guess MOD means “mortgage by deposit of title deed “.
Usually once the banker lends you the money , after registering the house (or UDS in case of new property), the sale deed / title deed will be with the banker. If you take an EC only your name will be reflected in the EC.There were cases of fraud in this method .If you are well connected , you can get a duplicated copy from the registrar office and sell the house to some one else. The buyer may not be aware that there is a loan pending on that house .
To avoid this banks have started adopting MOD. Once the registration is done , they will ask you to do mortgage in favor of the bank for the loan amount. This needs to be executed in the registrar office and it will cost money towards stamp duty,legal charges etc. After doing MOD if you take an EC , your name and bankers name along with the loan amount will reflect in it. So the chances of fraud is minimized.
From the banks perspective its very safe for them. But for us we need to bear the expenses of executing MOD. Moreover when you try to move your loan to any other low cost banker , this MOD has to be cancelled by the old bank. There will be lots of paper work and procedural issues associated with this..
These are the facts which i learned from my experience. I may not be 100 % correct . Please correct if my understanding is not correct
For me it turned positive.. for Home Loan bank forced me to buy their shares. At that time I was not having enough money so I was bit hesitated. But then I managed somehow and now this proved a positive investment for me and I am getting good dividend.
Never heard any bank asking to buy shares. Which bank was that?
Are you sure its the bank shares you bought, and not some other product disguised like shares?
I am not sure its really their company shares ? Are you not mistaking it with the UNITS of some ULIP !
Thanks Manish for the article.
Same thing happend to me and some 3 years back. I approached Indian back for HL, first thing I noticed that they were not willing to given loan even though I had better repaying capacity. They were very lethargic and their attiture was worst. Finally they agreed to give loan and asked to pay 50K pa as ULIP insurance for 12 L loan for 5 years :(.
I did not know these rules by the time and I had to accept their loan with the policy. Aftre 3 years my NAV was 130000 and I decided to withdraw it. After penalty of 15% I got 110000 hand. What a waste of my hard earned money just for the bank manager want to meet his deadlines.
You should have resisted it and should have enquired a bit on this . The best thing for new people after knowing this is to tell bank before hand that they are not ready to buy any crap with home loan , if they are ok , then only move ahead . Put the ball in their court !
Thanks for sharing your incident !
Hi,
I have faced this issue too. I recently took a home loan of 41 lakhs from AXIS bank in Bangalore. Of this amount, Rs.1.5 lakhs has gone just for insurance! The bank told me it was mandatory and so I had to take these insurances.
(I paid Rs.1.1 lakh for life insurance as the bank wanted to make sure that they will get the money back if anything happened to me and an additional Rs.40,000 for property insurance as the bank wanted to make sure that they get their money back if anything happened to the property)!
Kiran
These are just illegal practice, I think you should file a consumer court case against the bank on this
I can understand the life insurance part is unethical and probably illegal as well. However, I was told that property insurance (to protect from fire, earthquake, etc) is mandatory according to latest RBI guidelines. Is it true?
I have not yet come across that . Ask the person for RBI guidelines on this matter if they force you . At the end, you can go ahead for it as its very cheap !
On further inquiry it became clear that property insurance (to safeguard against fire, earthquake, etc) with bank as assignee is mandated by RBI and is demanded on paper by all banks that are regulated by it. However it is not applicable to NBFC’s like HDFC, Dewan Housing Finance, LIC Housing finance, etc which are overseen by a different regulator.
Hmm .. Yea I think you are right now . Thanks for finding out that !
Hi Manish,
I don’t know how come Property Insurance is cheap. My property is located in Nashik.
Market value – 52 lakh. Loan Amt – 40 Lakh. Loan Tenure – 25 Yrs.
Construction Cost – 1545 sq ft X 2000/- = 31 Lakh approx.
The quotation I received from SBI general Insurance – 34,000/- (for 52 Lakh for 25 Yrs.) (It includes Fire and Earthquake). I have questioned many ways but they are not agreeing to consider Construction cost but they say for Flat they consider Market Value.
I am confused and not satisfied but don’t know how to fight. Any help would be appreciated.
I also checked – https://www.sbi.co.in/webfiles/uploads/files/1327043528466_APPROVED_MITC_VER6_APPFORM.pdf
where they mentioned, it should be at market value.
Insurance:
The house/flat shall be insured comprehensively for the market value covering fire,
flood,
Earthquake
etc. in the joint names of the Bank and the borrower. Cost of the
same shall
be borne by the borrower.
Regards,
Yuva
I think you can take help of RTI here to find out what is the exact banking rule ~!
There have been cases where you are offered an extra amount as loan to invest in the separate life insurance policy. For instance if your loan is for 30 Lakhs, you are approved 32 Lakhs of loan, so that you can invest the remaining 2 Lakhs in the policy. Crazy. Desperate.
Yes, I am hearing cases like these !
When a person is taking a home loan, he is already taking a financial burden of repaying the loan in EMI’s.
Opting for any other committed payment along with EMI’s gets burdensome for most of the home loan customers and it is advisable that you dont opt for any policy along with the home loan.
Either tell them that you know the rules or better show them this article…
Yes ! .. agree with that Karan !
I have used a simple tactic, similar to option 2 above. Before you signup for the loan, you make it clear to the representative, that you will sign up to the loan, only if you are not forced to taken any other product, else you are not interested. It worked!
That you did because you knew the rules ! .. Most of the people have no idea that these are all marketing gimmicks !
Hi,
Nice tip Manish…
I had taken loan from LIC and did not face any problem incase of my housing loan.I myself had asked for the loan insurance and they said they have stopped it.
But I had gone to avail for locker facility with couple of bank and have been asked to take policy (Ulip or pension plan)by SBI,Axis and BOI.
Atlast I got fed up and ended in not having the locker facility.
Anyways thinking of trying your last trick… 🙂
Thats a Tit for Tat trick 🙂
Yea .. 4th one is a good one , but you need money in hand and its a bit risky !
This is a major problem! Several of my friends and relatives are victims of this.
Major loan givers like SBI may not yield to option 2 and probably wont care about option 3.
I think option 4 is the most hassle-free option! You get the loan from whomever you, want try option 1 . Bank employees always get jittery when the customer knows the rules. If that doesn’t work exercise option 4.
Of course one must have an alternate policy in place even before we approach the bank so that if we return the banks policy and the information reaches the bank we have the other policy ready!
No Pattu , All the banks including SBI are all afraid of RTI atleast (might not be for banking ombudsman) 🙂 .
Pattu
I do not think even option is hassle free. Most of the home loan insurance are single premium policies, not the regular ones. Regular premiums are much higher than the single one.
Manish
Have you calculated,how much difference is the premiums if we go for a normal term cover of the same amount.
A normal term cover with annual premium is way better than an single premium policy.
If I am not wrong there is a discussion on this in the WealthWisher blog
Happened with me recently.
applied for ~15L loan from Indiabulls.
After all the processing and submitting the processing charges money, they informed me for compulsory 25 K loan. Even I told they that I know the rules, they created a lot of problems.
However, they agreed to take my case as a big exception.
So arrange for the rest of money.
But once the registry day was approaching ( If I wouldn’t by going for that on time, will loose the booking amount 1L to builder), within last one week time Indiabulls created many problem, and changed a lot of things which they committed that they will take care.
Finally I’ve to loose some money after calling my deal off.
Reason : They didn’t get their cut at personal level due to no 25 K insurance.
Sad.
Good one ! .. thanks for sharing that experience !