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Is Home Loan Protection Insurance important?

When you take a home loan, you owe the lender money. The lender a right to your house while the loan is still outstanding. So, in a situation where you lose your life and no surviving member of the family can repay the loan, your home may be taken away by the lender. You can protect yourself and your family by buying a Home Loan Protector Insurance.

If you lose your life mid-way through repaying the loan, you can be rest assured that with this insurance your home loan repayment will not be at risk and you home will not be taken away from your surviving family members.

For example, say you took a home loan of Rs. 25 lakhs. In the next two years, you have paid back Rs. 5 lakhs of the principal amount, and Rs. 20 lakhs remains to paid. However, at this point you meet with an accident and die, and no one in your family can meet the EMI payments due to the lender. In this scenario, if you have home loan insurance, the insurer will repay the remaining amount of Rs. 20 lakhs on your behalf. If you did not have this insurance, your home might be repossessed and your survivors might not have a home to live in. The sum assured keeps getting reduced as time passes, such that you do not pay for protection that you do not need.

So, is home loan protection important? Sure it is. Your family is still protected and can continue to build an asset in the family home even though someone else, i.e., the insurance company, is paying off your home loan on your behalf if you are not around.

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Please keep in mind that Home Loan Protector Insurance will protect you only in case of death, but not in case of job loss or loss of income due to disability. And, these policies are not any cheaper than a regular term insurance policy. So, you might want to consider alternative plans, as long as they do cover your loan repayment liability towards your lender.

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seo said : 03/08/2011	nice comment...!!!
S M MANCHANDA said : 17/02/2009	The purchaser of this product should ask a question that what will happen to the premiums one has paid if the house loan is repaid before the term of loan. As single premium is charged under such plans if policy is taken from the Bank advancing the loan, it becomes important to know as to what will happen to the premium if the loan is repaid early before the chosen term. Will the insurance compamy refund the premium on pro rata basis.