Why Life Insurance Policy Is Needed To Cover Home Loan?

It is everyone’s dream to have a home of their own. Apart from being a status goal, it also provides security and protection to the family if anything untoward happens to the main breadwinner. Life is always uncertain, and there are no guarantees regarding health and safety. ‘Life Insurance Policy’ is a way to secure your future whatever you think about your future and your family’s future.

A home that’s fully owned helps the family to stay together and hopefully continue their accustomed lifestyle and habits without much change.

With today’s prices zooming out of the reach of most middle-income group families, taking a home loan has become almost a given. Under these circumstances, when you have taken a home loan and have the commitment of regular EMIs to pay, any disruption in your financial situation can be devastating. With such high stakes and serious risks involved, it’s only logical that you want to protect the status quo.

Your life insurance policy could be of enormous benefit in your absence when your family has to make the repayments on the home loan.

Typically, home loans are in the region of several lakhs, and taking out an insurance policy protects the family from the liability of repayments.

This is why many lenders advise home loan borrowers to take out a life insurance policy along with their loans.

Is A ‘Life Insurance Policy’ Mandatory Along with Home Loan?

While there is no compulsion to take out a life insurance policy and a home loan, it makes a lot of financial sense. You can link the insurance policy to the loan.

Any authority does not mandate this.

If you have an existing life insurance policy, you can assign it to the loan.

The insurance coverage offered by the lenders is usually a term insurance plan that comes with a low premium and high coverage.

The lender may offer a single premium insurance plan to make the deal more attractive and add the premium amount to your loan amount. This frees you from any additional financial burden. Though this may increase your EMI marginally, it is not a significant load on you when you consider the advantages.

Points To Keep In Mind While Purchasing ‘A life Insurance Policy

• If you have already purchased term life insurance, you can take another one that’s equal to the loan amount
• According to financial planners, take coverage of at least 15 times your take-home salary.
• Ensure that your life goals and financial liabilities are covered via the term insurance plan
• If you choose to take a mortgage insurance plan, you can benefit by the loan amount decreasing over time, though the coverage amount also falls correspondingly.
• Mortgage plans are suitable because most home loan borrowers tend to repay the amount before the loan tenure.

Are There Other Options?

The lender may offer you the insurance policy along with premium payment benefits. However, if you want to explore other options, these are also available.

You can purchase a term insurance policy independently from any other insurance company if you can get better terms.

Or you can purchase a mortgage insurance plan that specifically addresses the insurance coverage requirements of home loans.

Whatever option you choose, check the premiums for all options. This would be based on your age, the term, and the amount.

Home is a basic need.

Look, there are three things that everyone wants, and everybody looking for a basic need Bread, Attire, and Home. It takes a lot of hard work for years to build a dream home, and nowadays people have options like loans to build a home. But the truth is getting a home loan is not easy at all, to take a home loan, you have to make several rounds of the bank and collect and submit many documents as per the loan’s policy. Before getting a loan, you need to think about how will you pay back the loan amount, is there any proper source of income? Because you need to show that you have a proper way income, these are some basic needs that you have to clear before getting a loan sanctioned.

If you are a single bread earner in your family then it would be quite hard to pay the EMI of your home loan, because the EMI amount will affect your monthly budget. Suppose the bread earner of this family met with a major accident and he is not able to earn bread anymore for his family. In this scenario, your family will have to face a triple loss. First, you lose your bread earner, and then you have to bear the expenses of the bread earner, and the third loss is because it has become difficult to repay the loan, then even your house will not be yours.

‘Life Insurance Policy’ can make things easy

As usual, people know the term policy is only beneficial after the demise of an insured person because the nominee will claim the death benefit and they will get a lump-sum amount. But very people know that term policy can help you in the situation of a financial crisis and make things easy for a family. Term policy is just helping you to secure the future of your family; with the help of term policy, you can also fulfill the dream of a dream home. Although, in this scenario term policy and the EMI of the home loan are included in the home loan and recovered over the tenure of the home loan through increased EMIs. But the question is insurance company wants a single premium payment term policy and it’s like playing hide and seek with the insurance company.

Some of Term Plan provides you with a loan

Conclusion

Having a life policy is a basic need, but paying the EMI & Premium of two different services is quite hard if you are a single bread earner for your family. But with the help of life policy, the burden would be low and it’ll make things easy around you. Pressure can turn you any side, and having the stress of paying the EMI of a home loan and premium-of-life policy will definitely affect your monthly budget.

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