Housing loan market has been growing in India at a phenomenal rate. Number of borrowers and the amounts borrowed have been ballooning at an unprecedented pace. Since loan amounts are high and the tenures long, given the uncertainty of life, there is a definite necessity to insure the housing loans.
The good news is that the banks / financial institutions generally provide Home Loan Insurance along with the home loans. In many cases, it is offered free of cost (the actual cost of this insurance having been included in the home loan cost). In any case, the cost not been high, it is worth having a home loan insurance. The main advantage of this insurance is the peace of mind and a sense of security it brings to the whole family of the insured.
In case of unfortunate death of the home loan borrower, the burden of repayments of loan falls on the family. This is a double jeopardy for the family, as the family has not only lost its bread winner but now also has to repay the loans which it may not be a in a position to repay. The result is foreclosure of property and eviction etc.
But, in case the borrower has taken a home loan insurance, the insurance company repays the home loan in the event of the borrower's death prior to full repayment of loan. Thus the bank / HFC is prevented from taking over the property from the surviving family members.
As the loan amount increases, so does the repayment amount which is determined in the form of Equated Monthly Installments (EMIs). This necessitates the purchase of home loan insurance.
Most banks / HFCs have an insurance arm and have tied up with insurers to provide this type of insurance cover. This is a sort of Term insurance wherein the amount covered becomes payable only upon the death of the borrower. In case the borrower survives the tenure of the home loan, the insurance cover lapses and the insured does not get back any money. Accordingly, just as in case of any other term insurance policy, the premium is very nominal. Moreover. These are generally single premium covers, i.e. the insurance premium is payable only once - at the time of buying the policy.
Any home loan borrower, who does not go for this insurance cover at the time of applying for a loan, may take the insurance cover at any point of time. However, if the cover is taken at the time of applying for the loan, the cost of cover is substantially lower. Also the borrower has the opportunity to negotiate with the home loan provider.
