Insurance Cover Of Your Home Loan

Buying your own home is an essential requirement. It ensures that you have a strong foundation and a place of security. Of course, buying a home is associated with huge monetary demand, however, it also gives a sense of accomplishment. Even though a house is the best investment you can make, it is still a liability until you service the home loan repayment and the costs associated with the house. This goes especially for the salaried population who have their job as the main source of income.

The amount of home loan availed of to buy a house usually consists of a huge percentage of monthly income. In case of any unforeseen circumstances something happens to the primary income earner, it becomes almost impossible for the rest of the family to manage the household expenses let alone service the repayment of the home loan under such circumstances. Most of the time there aren’t enough savings to see the home loan repaid through its entire tenure. To avoid such situations, it is highly advisable to get an insurance cover for the home loan in case you are planning to buy a house.

It is a basic principle of financial planning that goes without saying that it is important to buy life insurance to cover all the financial liabilities of the family. As mentioned earlier, buying a home means bringing one more liability in your life, although temporary, will impact your financial situation significantly. So in order to save your family from facing the undesired expenses, it is wise to choose a home loan insurance. This will ensure that the legal heirs will inherit the house which doesn’t become a liability for their entire life.

In the eventuality of death, the insurance company pays the lender the outstanding loan amount ensuring that the family members are involved in the repayment by any means. Not only does it help them not to worry about the repayment but also keep them safe from losing their house. There aren't any rules or regulations that mandate buying insurance for your home loan, but the lender will always insist you take it. It is due to the fact that the later hassles are avoided when it comes to taking possession of the property. The lender will have partner companies that will provide you with insurance. It is also possible to choose a policy by another insurance company and assign it to them.

The tenure of the insurance policy dedicated to the home loan should be equal to the tenure of the home loan repayment. The lender will often ask you to buy a single premium term plan policy which is specially designed to go with home loans. The amount will be added to the home loan and will be recovered in the form of bigger EMI amounts. Rather you should choose an annual premium policy where you will pay a particular amount once a year which can be canceled anytime if you wish to. This is due to the fact that borrowers can choose to prepay the home loan to become free from any more cash outflow.

It is also possible to choose a term plan where the insurance amount gets reduced with the outstanding loan amount. In case you find such a good deal, then go ahead with it. This will make the insurance policy cheaper and affordable.