Borrowers are frequently misled by their lenders and persuaded to purchase unnecessary home loan insurance. Some financial institutions consider certain goods to be necessary and charge additional fees for them. It’s important to note, however, that this is incorrect. Purchasing mortgage insurance provides additional peace of mind, but it is not required. A borrower’s outstanding loan debt is covered by a home loan insurance plan in order to protect the lender in the event of the borrower’s death within the loan repayment period. With each year that the loan balance drops, the insurance coverage offered by these plans gets smaller and smaller. Insurance companies pay off outstanding loans if a borrower passes away while their policy is active. A house loan insurance coverage may be cancelled if the loan is fully repaid, the borrower dies, or the loan is transferred to a new lender.
The subject of home loan insurance is a contentious one, with many individuals holding differing viewpoints. Some believe that term insurance can be combined with home loan protection. Some argue that systems like this really damage purchasers more than they help. Term insurance-like home loan protection plans are available. In the event that the individual who has taken out a loan dies, this insurance will take care of your family. After the family has claimed the protection plan, the remaining balance on the house loan can be repaid. You are covered for the duration of the loan. Is there a good reason to purchase home loan protection plans? Exactly what is the purpose of these kinds of schemes? Here are a few possible explanations:
Included with the Home Loan:
Because there are so many comparable items on the market, a consumer is often perplexed. It is common for home loan protection to be included in the house loan itself. The financial institution from which the loan is granted will provide a variety of home loan protection services. It is, however, not required that you purchase these plans, and you have the option to do so at a later date from a different service provider.
Tax advantages and a sense of security
Section 80C of the Income Tax Act 1961 allows you to deduct the premiums you pay for a home loan protection plan from your taxable income. However, if you’ve borrowed the premium money as well and it’s part of your monthly loan repayment EMI, this won’t work. In the event of a catastrophe, you may rest easy knowing that your most prized possessions, like your house, will be safe even in the direst of circumstances.
Affordability in Premium Payments
For the purposes of this comparison, mortgage loan protection plans are akin to term insurance policies. The scheme can be purchased for a one-time fee. The loan holder may not be able to afford the monthly payment. If this is the case, the premium is added to the loan balance and is then paid back in equal monthly or quarterly instalments. Suppose that the total loan amount is Rs 25 Lakhs and the one-time premium is Rs 2 Lakhs. As a result, the total loan amount is increased to Rs 27 lakhs, and repayment is made through equal monthly instalments (EMIs). This simplifies the process of paying the premium. One-time premium payers may be eligible for a surrender option, however, this will depend on the scheme’s terms and conditions.
The Asset and its Subsidiaries are Safeguarded
The house and other valuable assets might be confiscated to satisfy the outstanding loan amount in the event of the loan bearer’s death. There is a good chance that the family’s assets would be lost even if the house was saved. Home loan protection plans protect assets by repaying the outstanding loan amount in such a circumstance. As a result, even if the loan bearer defaults, the family’s financial well-being will not be jeopardised in the process.
Safeguards Your Family
In the event of sudden death in the family, if the person who was repaying the loan happens to be the person who died, the family must pay the remaining balance. Banks have the right to seize a family’s home or other assets as collateral for unpaid loans if they are unable to make payments. This may be prevented if a home loan protection plan is in place. They have to file a claim for any loan protection amount that insurance covers. Even if the loan holder dies, the family will still have a place to call home.
As a result, if you wish to safeguard your family in the event of an emergency, this plan is essential. You must take into consideration both your present and anticipated future earnings when creating a budget. Take into account your savings and remember to put away some money in case of an emergency. Calculating your budget is the first step in finding the home of your dreams.