Home-Loan Insurance vs separate Term Insurance

POSTED BY Yogesh K ON May 8, 2012 6:07 pm COMMENTS (3)

While taking homeloan many companies offer insurance for homeloan. Person A & B both have taken home-loan of 50 lakhs individually. Person A opts for insurance attached to homeloan while person B opts to take term insurance of 50 lakhs. Let’s assume both persons A & B dies after 3 years. The Person A will have insurance cover proportionate to the remaining home-loan. Now the question is in which case investigation will be less while sanctioning the insurance amount? In which case claim settlement will be smooth ?

3 replies on this article “Home-Loan Insurance vs separate Term Insurance”

  1. Dear Yogesh, no matter it’s mortgage term cover of person A or personal term cover of person B. The insurance Co. ‘ll investigate the claim in similar fashion.

    A small shock for you – if a claim happens at all in that mortgage cover, onus lies on the family of the borrower to file & get the claim amount. Loan provider ‘ll not come in to the picture. Interestingly, if the claim is passed, the loan provider ‘ll come into the picture as the mort. term cover was assigned to that financial institution & accordingly the insurer ‘ll pay the claim amount to that FI.

    Thanks

    Ashal

  2. I don’t think it will be a different treatment.

    In Home Loan term plan you pay the premium for the entire loan amount every year for, say, 20 years, and also pay interest on that amount as part of the home loan!

    Assume premium for 50 lacs for someone is Rs.5000. Usually an amount of 5k*20 = 100k will be added to the loan amount and added to the loan. You will pay an interest in this amount as well (as this is added to home loan).

    Should something happen to the home owner only the left over loan will be paid by the insurance company. Say – something happens after 15 years when loan outstanding is 10 lacs. In this case the Bank will get 10 lacs.

    However if it is a separate term plan the legal heirs can get 50 lacs, pay 10 lacs to the bank and retain 40 lacs.

    In another case assuming the home loan is closed in 10 years you may also choose to stop paying the renewal premium for the term insurance assuming the only purpose of that insurance was to safeguard your family from liabilities. In the former case you would have paid insurance for 20 years which is not a waste.

  3. I dont think there will be any different, both are term plans only , the only differences which I can see is

    1. Home Loan term plan will be a single policy term plan whereas pure term plan will be yours personal one which will be yearly premium and more cheaper

    2 . In Home loan term plan , at times the nominee is the home loan company , which is not in case of term plan personal one

    I dont think its recommeded a lot to take a home loan cover , its now a trend these days to mix it with the home loan and people generally take it up , read this incident https://www.jagoinvestor.com/2012/04/axis-bank-sold-policy-without-informing.html

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