Home Loans are a significant form of debt to handle. They involve large amounts of money and require you to devote sizeable parts of your monthly income towards repayments for as many as thirty years; that’s 812 months. However, the fact that your lender has provided you the loan indicates that you currently able to repay the amount; a process that will only get easier as you benefit from appraisals, bonuses & other windfall gains during the course of your working life.
In other words, as long as you’re around, everything will be just fine. You’ll pay the EMIs, and eventually repay the entire debt too. However, life is very uncertain and if something unfortunate was to happen to you, the responsibility of repaying the home loan falls on the shoulders of your family members; family members who might not be financially capable of handling this debt.
This is where an insurance policy can come in and provide you peace of mind, even from such uncertainties. They ensure your loved ones do not have to pay the EMIs or see the house go up for auction. However, before you go out into the market and look for an insurance policy, keep these 4 things in mind.
1. The insurance that comes with home loans.
Most lenders will offer an insurance policy with their home loans. Whether you opt for this insurance depends on a number of things. Some lenders have tie-ups with an insurance company and provide one of their plans as the default and only option. Some have the same setup but they allow you to choose a policy besides the one they are offering, so you are free to go with the one you like. It is better you opt for a lender that doesn’t force anything on you, including the insurance policy.
2. Look out for single premium payments.
These policies function normally; the only thing is that you pay one single premium upfront instead if small amounts over time. This adds to the other up-front costs such as the down payment, the processing fee, stamp duty, etc.
3. Payment methods
There are many ways the payments can be made. Firstly, you might be able to pay for insurance yourself, either upfront in a single premium form or in monthly, quarterly, half yearly or yearly premiums. On the other hand, some lenders insist on making the payment in your behalf and add the total cost to the loan value. This will lead to higher EMI amounts. If you pay the premium yourself, you can claim the amount as deductions up to Rs. 1, 50,000 under section 80C of the Income Tax Act.
4. Coverage.
The cover offered by some policies gradually comes down as the outstanding amount decreases. For example, a plan with a 25 lakh cover could reduce to as much 13.5 lakh after the tenure of the loan. The drawback with this is that if you were to extend your tenure the outstanding amount would increase. In which case, your family members would have to arrange the difference.
Keep these 4 things in mind when looking for insurance on home loans.
In other words, as long as you’re around, everything will be just fine. You’ll pay the EMIs, and eventually repay the entire debt too. However, life is very uncertain and if something unfortunate was to happen to you, the responsibility of repaying the home loan falls on the shoulders of your family members; family members who might not be financially capable of handling this debt.
This is where an insurance policy can come in and provide you peace of mind, even from such uncertainties. They ensure your loved ones do not have to pay the EMIs or see the house go up for auction. However, before you go out into the market and look for an insurance policy, keep these 4 things in mind.
1. The insurance that comes with home loans.
Most lenders will offer an insurance policy with their home loans. Whether you opt for this insurance depends on a number of things. Some lenders have tie-ups with an insurance company and provide one of their plans as the default and only option. Some have the same setup but they allow you to choose a policy besides the one they are offering, so you are free to go with the one you like. It is better you opt for a lender that doesn’t force anything on you, including the insurance policy.
2. Look out for single premium payments.
These policies function normally; the only thing is that you pay one single premium upfront instead if small amounts over time. This adds to the other up-front costs such as the down payment, the processing fee, stamp duty, etc.
3. Payment methods
There are many ways the payments can be made. Firstly, you might be able to pay for insurance yourself, either upfront in a single premium form or in monthly, quarterly, half yearly or yearly premiums. On the other hand, some lenders insist on making the payment in your behalf and add the total cost to the loan value. This will lead to higher EMI amounts. If you pay the premium yourself, you can claim the amount as deductions up to Rs. 1, 50,000 under section 80C of the Income Tax Act.
4. Coverage.
The cover offered by some policies gradually comes down as the outstanding amount decreases. For example, a plan with a 25 lakh cover could reduce to as much 13.5 lakh after the tenure of the loan. The drawback with this is that if you were to extend your tenure the outstanding amount would increase. In which case, your family members would have to arrange the difference.
Keep these 4 things in mind when looking for insurance on home loans.
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