Consider these before Buying a Home Loan Protection Plan
Apr 03, 2019 Home Loan
In the uncertainty of times, no one is aware of what will happen in future. Unfortunate things can happen, putting you through an additional financial crunch. So when your home loan approver offers you to take a home loan protection plan, it makes sense to invest in it as well. The benefits of the same are too many to avoid.
We discuss everything you need to know about home loan protection plan and things that one must keep in mind before buying one:
We discuss everything you need to know about home loan protection plan and things that one must keep in mind before buying one:
Property insurance and home loan insurance are different
Even though they sound similar, they are very different. Property insurance helps you in case your property has suffered any physical damage. While the home loan insurance helps cover the loan liability in case the borrower dies during the repayment tenure.
One of the essential things to remember is that home loan insurance does not provide cover in case of natural death or suicide. You want the plan to cover to pay in case of losing a job, physical disability or critical illness; then you will have to pay an extra premium.
One of the essential things to remember is that home loan insurance does not provide cover in case of natural death or suicide. You want the plan to cover to pay in case of losing a job, physical disability or critical illness; then you will have to pay an extra premium.
Make your own decision
Even if your bank insists that you should buy a home loan protection plan, it should be your decision whether you want to buy it or not. Unless you are sure about it, you do not have to buy it.
Tax deduction
Under Section 80C of the Income Tax Act, one can claim for the deduction if they have borrowed home loan protection plan. Though the same is not available for a deduction if you have borrowed the protection amount from the bank or you are paying EMI for the same.
Changing your home loan will affect the plan
When you decide to transfer your loan from one bank to another, the home loan protection plan ceases to exist. That means it is no longer applicable once you move your home loan. The home loan protection plan is a one-time premium, and since you have already made the payment, the transfer of home loan affects the life of the protection plan.
Term insurance and home loan insurance are different
In term insurance, the insurance company provides the entire cover to the borrower. While for the home loan insurance, only the outstanding loan amount is settled. For example, if a borrower takes the home loan of Rs 50 lacs and home loan insurance cover with it. If the dies while paying Rs 30 lacs, then the insurance company will only cover the outstanding Rs 20 Lacs. While in the case of term insurance, the company will pay the entire Rs 550 lacs to the family.
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