Home loan insurance for the home loan of Rs 20 lacs

POSTED BY robert ON January 15, 2014 1:23 pm COMMENTS (10)

Sir, I had taken a home loan for 20 lakhs please guide me which will provide me secuirty

for the loan amount – bajaj, lic have discontinued thier policy any other option  for 1 term payment for 20 years

10 replies on this article “Home loan insurance for the home loan of Rs 20 lacs”

  1. Ashish Garg says:

    In last para, please read, “it is mandatory for co-operative society to take fire and other…”

    1. vz1hrp says:

      Hello ashish,

      to clarify : Banks only mandate home loan insurance which is a term life insurance equal to sum of loan account? how much would that come upto for a loan of 20 lakhs and tenure of 20 years?

      Banks do not insist on home property insurance which has to be done by the individual?so if i stay in an apartment i need not do this as building insurance would be done by the apartment society? (although it may not cover theft insurance)

      Thanks

      1. Ashish Garg says:

        Hi Vz1hrp,

        Did you just clarify or asking for a clarification. Too many question marks giving me an indication that you are asking for clarification.

        Banks only mandate home loan insurance which is a term life insurance equal to sum of loan account? – yes banks only mandate for protection against loan taken.

        How much would that come upto for a loan of 20 lakhs and tenure of 20 years? – If you take the loan insurance, I am sure the premium would be higher than a pure term plan for life insurance. I am saying so as I have recently take a home loan and Bank was not able to offer me loan protection beyond 50L (my loan is significantly higher than that). The premium they were charging for 50L was higher than what I am paying for a 75L online term insurance plan.

        Banks do not insist on home property insurance which has to be done by the individual? – Yes the property insurance has to be taken by the individual / owner of the property.

        So if i stay in an apartment i need not do this as building insurance would be done by the apartment society? – Yes, but you may always take a policy for your own security. You never know when the society forget to pay premium or the society management changes and decide to shift to a new insurer. In between there could be a gap. Also, you can take the comprehensive householder’s policy that can cover both structure and contents. Contents can be covered against theft as well.

        Ashish

        1. vz1hrp says:

          Hello ashish,

          I should have worded my sentence properly. I did indeed ask for clarification. Thanks for answering it point by point

          This whole concept on home loan insurance is new for me. When i had applied for a loan in 2006 i was asked to produce a guarantee(which my parents did) instead of taking an insurance. I am contemplating shifting my existing loan and now i understand that its mandatory to get a home loan insurance done. I was curious to know the approximate premium i need to pay(20 lakh loan for 15 years) to evaluate if it would make sense to change or to stick with my loan .

          Thanks once again

          1. Ashish Garg says:

            Hi Vz1hrp,

            As I said banks only mandate for loan protection, this does not mean you need to take a loan protection policy. As I told you in my case, I have not opted for it and have instead taken an additional life cover. So for your loan you may always look at the same. Whether you stick with your current bank or shift to a new loan, it is better to take a cover for the loan taken.

            Assume something unfortunate happens today, will your father (who is a guaranteer now) be able to repay your loan? So why hang a sword on his neck when you have taken the loan.

            As for the loan protection insurance, bank shall offer you a plan that will keep on reducing the sum assured as you replay your loan, while the premium would be added to your EMI or you may choose to pay it one go. Not sure about the premium, but it should be somewhere around 40-45K. You may wish to check with your bank for exact details.

            I still suggest, taking a term cover and adding householders policy is still a better choice.

            Ashish

  2. Ashish Garg says:

    Motor Insurance covers damages to vehicle and number of other coverage such as third party, co-passenger etc.

    If you look at Home Loan insurance combined with house structure and its content, basically you are clubbing two products together and eventually your premium would be higher (in current scenario) than if you take these two product separately.

    Bank providing loan does not considering the scenario where the borrower is alive and property is damaged. If you are alive, bank would consider you have the capacity to pay so you should be paying your EMIs irrespective of the fact the property is damaged or not.

    Therefore, it is advisable to buy a term life insurance and then add on with a householders policy that shall cover the structure of the property as well as content within the property. Moreover, if the property is an apartment in a society, it is mandatory to take fire and other insurance for the whole building to safe guard the residents’ content / belongings in case of a natural calamity / fire etc.

    Ashish

  3. rahul123 says:

    i bought an insurance with SBI (in 2007), don’t know about the current scenario.

    But, think for a moment, house loan insurance is similar to car insurance, where the insurance is provided against the car (asset).

    Thanks,
    Rahul

  4. Ashish Garg says:

    Hi Rahul,

    Are you sure that Home Loan Insurance provided by banks (or insurance companies) also covers the damages to house? Which insurance provider is providing such coverage with home loan, please provide details.

    As far as I know it only covers the life of borrowers and not damages to house. For damages, you need to cover with Householder’s policy separately.

    Ashish

  5. rahul123 says:

    @Ashish and Robert

    What happens if borrower survives but there is damage to the house?

    Say for example if the house is damaged or serious damage has happened after earthquake (and loan taker is not in the house or on vacation and is survived). As the house for which loan has taken doesn’t exist, if the borrower doesn’t pay money then there is no way bank can recover the loan amount. This is the reason why many bank force to take home loan insurance .

    Thanks,
    Rahul

  6. Ashish Garg says:

    Hi Robert,

    Home loan insurance is basically to cover the loan amount in case something happen to the borrower. Bank will recover the balance loan amount through this insurance.

    Suggest, instead of looking at a home loan insurance, look at an online term life insurance plan to cover yourself as well as the value of loan.

    Ashish

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