SBI home loan insurance with low premium

POSTED BY Boobathi P ON January 12, 2013 2:50 pm COMMENTS (16)

HI,

I have to take home loan insurance for the loan I applied from SBI. SBI says under RINN Raksha policy I have to pay 1.35 lac as a single premium or 5 multiple premium to cover my 40 lac loan for 25 years tenure which is also comes under group insurance plan. Do I really have to pay 1.35 lac? I feel it as a huge amount. Please advise on this….

Therefore I am thinking about other option how about going for the term insurance where I can pay yearly basis. Again in this case they say I have to pay around Rs9300 as the premium for every year is that true? I have gone through so many sites including SBI website. I didn’t get any formula how they calculate the premium for home loan term insurance. Even after goin through so many sites I didn’t get any clear idea about this RINN Raksha policy.

In the meantime I was checking other insurance policy provided by SBI I came across smart shield home (decreasing Term Assurance) loan protection policy which is an idividual insurance plan where I feel the premium is very less. Still I am confused please throw some lights on this.

Also please let me know the difference between RINN Raksha and Smart shield policy and its benefits and key features and which I shud opt for.

Also advice me which plan should I go for Individual protection plan or group protection plan? I also want to make a note here that I dont want to go for a single or multiple premium. I like to go for a term insurance as I am planning to finish my loan within 10yrs

Also advice me where I can pay low insurance premium in either of these policy or shud I check with other banks? and also kindly let me know the actual formula how they calculate premium for term insurance

FYI: My age is 30, loan tenure 25 yrs, loan amount 40 lac,SBI loan interest rate is 10.15% and non-smoker

your expert advice is highly appreciated

With Regards

Boobathi P

16 replies on this article “SBI home loan insurance with low premium”

  1. Himanshu says:

    Hi Ashal ( you are ubiquitous in the personal finance world)

    I got a mail from SBI saying that this insurance is mandatory. However suprisingly my loan was of 38L but they have asked for a cover of only 29L for 15 years at a one time premium of 12,900.. I am a bit surprised because if I see the same cover from online providers my per annum premium is coming out to be 4.5-5k . Does this mean that taking it one time premium way would be cheaper ?

    1. One time premium will be lower in amount, but that does not mean cheaper. Imagine giving someone 100 now compared to giving them 20 for next 500 yrs , which is cheaper ?

  2. gurudgr8 says:

    Hi Ashal,
    Could you please explain the differences between the SBI Life – Smart Shield vs SBI Life – Saral Shield vs SBI Life – eShield term insurances and how do we tie this to the home loan?
    Thanks, Guru.

  3. Dear Boobathi, these are optional riders. Please do not opt any one.

    Thanks

    ASHAL

    1. Boobathi P says:

      Hi Ashal,

      Thanks for your timely reply 🙂

  4. Dear Boobathi, yes, i’m talking about level term plan. You can calculate your own prem. from sbilife’s site for the combination of your choice. Say 2Cr. for 30 year or 25Y or 20Y…..1.5cr. for 30, 25, 20Y…….

    Thanks

    Ashal

    1. Boobathi P says:

      Hi Ashal,

      Is it really must to choose the below benefits while opting for level term insurance or is it an optional?

      SBI Life – Accidental Death Benefit Rider
      SBI Life – Accidental Total and Permanent Disability Benefit Rider
      Accelerated Critical Illness

      Thanks

  5. Dear Boobathi, why are you not opting for a normal large cover in Smart Shield?

    Thanks

    Ashal

    1. Boobathi P says:

      HI Ashal,

      I am not aware of that. Please explain me what is that? what will be the premium for that? is it a single premium or is it pure term insurance? What are the advantage and key features of this?

      With Regards
      Boobathi P

      1. Dear Baboothi, I’m asking you to purchase a normal Smart Shield policy on regular prem. basis for a term cover of 15 times of your yly income + 40L Rs. Loan amount.

        For example if the total of the income multiple & home loan is 2 Cr. Rs. please purchase that much cover. In this policy, the prem. ‘ll be regular yly prem. & your cover of 2Cr. Rs. ‘ll remain same for all over the term.

        Thanks

        Ashal

        1. Boobathi P says:

          HI Ashal,

          Still I am not clear abt the example u had given 🙁
          If you dont mind can u plz explain with some other good example

          R u talking about Level Term Assurance?

          In this case how many years I have to pay the premium and what will be the approximate premium I have to pay every year

          Thanks
          Boobathi

  6. Boobathi P says:

    Hi,

    Thanks for your answers

    In this case can I opt for smart shield individual plan? Will it fullfill my requirement where I could pay minimum premium yearly? If yes, Which one should I choose either Decreasing Term Assurance(Loan Protection) or level term Assurance? What is the advantage and disadvantage of these two?

    1. SBI Life – Smart Shield is an offline term policy which can be made into a decreasing cover
      Using the premium calculator

      http://www.sbilife.co.in/sbilife/images/contentimages/smartshield_bi.htm

      6324 annual premium for level term for 40 lakhs and
      76226 as single premium

      67524.00 for single premium for decreasing cover at 10% interest

      which is better? You may think 6324*25 = 1,58,100 which more than the single premium of 67524 for a decreasing cover. However
      Suppose you have 67524 as cash
      out of which you pay 6234 as annual premium and invest the rest in something that pays
      8% interest.you will get 4,19,743.
      Easy enough for you to decide which is better.

      You have no obligation to buy term insurance from SBI. You can get it online from anyone else and it will be even cheaper.

      However if you don’t want to argue about this with SBI take the smart shield level cover.

      If you critical illness and accident insurance get them separately as they have nothing to do with the policy.

  7. Taking a group policy make sense only if the home loan is taken jointly.
    The group policy should be a pure life insurance with no mandatory riders with annual premium payment or 2/3 of policy term like above policy

    In this case you could consider the premium for this versus individual online term polices one for each home loan borrower

    For a single borrower the pure term insurance is the best.

    The additional features mentioned above increases the premium of the above policy.
    in general life insurance premium is based on a set of underwriting rules and table corresponding to risk associated with each stage of life and habits (smoking).
    This will vary from insurer to insurer and then most authentic source will be someone working in the underwriting dept and not the agent. I am yet to meet one. If anyone who read this can point me to one I will be delighted. I have many questions to ask!

  8. RINN Raksha policy as per details available in their brochure which is clear enough

    http://sbilife.co.in/sbilife/images/File/documents/rinn_raksha_brochure_web_new_1.pdf

    is a group term insurance with rides such as accident benefit and critical illness, cash benefit
    there are also other options
    For a 25 year loan you can pay the premium for 10 years no need to stick to 5 years.

    I think this is a very complicated policy and you should not take it.
    Banks can insist only on life insurance. Asking a customer to buy a particular life insurance product itself is considered unfair. This kind of complex product is even worse.
    Go for pure term insurance online.

    If YOU want critical illness cover and accident cover get them separately. they have nothing to do with home loan buying process. They will of course be useful to you but no bank can insist you to buy it

  9. a home loan insurance is one with decreasing cover, If you take a loan for say 30 L the insured amt is 30 L as you clear the loan with EMIs the sum insured decreases each year.
    The bank is the nominee in most cases.

    you are under no obligation to take a single premium policy or any other policy that the Bank suggests. Yes if they insist on insurance then you need to take it. The best choice is to take pure term insurance online for your home loan amount with the bank as nominee. This will be cheaper than the single premium policy and more flexible,
    If they bank says they will refuse the loan if buy any other policy you can tell than cross-selling is considered unfair by RBI and IRDA. That you will complain to the banking ombudsman if they refuse the loan (they will need to give that in writing)
    In a pure term insurance policy the cover is constant. So if you choose the bank as the only nominee and after 5 years into the loan in the event of your demise the bank will get the entire amt though the loan amt would have decreased because of EMI payment.
    So one way to handle this is you start with bank as only nominee and then after a year or so you add your family member as nominee and give then a % of the sum assured equal to the clear amt
    That is after 2 years if 10% of loan has been cleared than bank will get 90% and 10% goes to your nominee. You can changes this as many times as you can as allowed by the policy. This involves some paperwork but this is the best option in my view

    IF the bank only insist on insurance and your family member is the nominee then great your family member is the only nominee

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