Everyone dreams of having their own house, it can be either a small flat or a big one in a classy apartment. Yet, this dream home takes a lot of discipline, planning and financial investment. Individuals have to restrict extra or unnecessary expenditures and secure a home loan. They also have to ensure that the loan EMI is paid from time to time.
Also, there could be situations wherein the investor might experience an accident or medical emergency that might put the housing investment in risk itself.
To understand this in a better way, let us take an example.
Example:
Ramakrishnan is a 35-year-old IT professional and works in a multinational company. He stays along with his parents (who are often unwell because of old age), his wife, and a little daughter. His wife is a homemaker, and his 5-year little daughter goes to school. They have never owned a house.
But he had a dream of having his own house. And so, somehow he managed to buy a home that came with a loan amount of Rs. 45 lakh. One day, while coming back home from the office, unfortunately, he faces an accident, which cost him his life.
The question is how the family members would manage to pay off the remaining loan in such a situation where his wife is a homemaker, old-age parents, and a little daughter to look after. How would the family manage daily expenses along with the home loan EMI when there is no inflow of money? Such situations might leave the family with plenty of financial debts.
This is one of the important reasons for someone to opt for a life insurance plan with a home loan.
Though, there is no rule to buy insurance for securing a home loan neither it is mandatory by law. It is at the sole discretion of the buyer. No financial institutions can force the borrowers to buy any insurance plan. However, the experts suggest buying a life insurance plan along with the home loan, which can help the insured’s family to fulfill the financial expenses in case of any unfortunate events. This way they could pay the EMI on time if the demise of the borrower takes place. Moreover, living expenses can also be taken care of under such cases.
Financial Experts Advice – One who wants to opt for a term insurance plan, he or she must buy a plan with a sum assured of ten to twenty times the annual income along with the payable loan amount. This way the family of the borrower will have enough funds to carry out their regular expenses and repay the loan if the borrower passes away during the tenure without the full payment of the loan amount .
For instance, the sum assured is equal to 10 times the annual income plus the payable loan amount. Thus, in this case, if the loan amount stays around Rs. 40 lakh and the annual income is around Rs. 6 lakh then the ideal sum assured for a term plan will be close to around Rs. 1 crore.
What are the benefits of Term Insurance Plan along with Home Loans?
Below mentioned are some of the benefits of opting for a term insurance plan along with home loan:
- On the death of the insured person during the policy tenure, it offers a specified protection cover to the family
- The family can pay the EMIs of the home loan with the amount obtained from the death benefits
- The amount can be a financial aid for the family (to carry out the financial expenses)
- If the borrower has survived the policy term and has opted for a term plan with return of premium option, the borrower is eligible to get the premiums back
- The sum assured remains constant, and it provides more flexibility to the policyholder as it is not fixed only to the housing loan secured.
The market is full of many life insurance providers; however, it is important for the policy seeker to walk through the various policies available. You can also compare different life insurance policies to meet your needs. Compare term plans online to find a pocket-friendly plan. By comparing different life insurance policies online, you and your family will have a protective shield against home loan liabilities in case of unfortunate incidents.
In a few cases, the bank might itself provide you with a term insurance plan which may come with higher premiums as compared to other standalone insurance providers. Since insurance is a third-party product and the banks would have to buy on behalf of the insurance policyholder, this shows the commissions are involved. Hence, the investors must compare the cost of the premium plans offered by banks with the ones available online.
