Article

Mortgage Insurance
September 14 , 2012

In India mortgage insurance is understood as home loan insurance. Often it is the sole earning member of the family who takes on a loan for home. It is unthinkable how the dependents can continue living peacefully, should the bread earner pass away before full repayment of the loan. Some home loan borrowers prefer to buy an insurance policy on their home loan than leave the rest to fate.

Who provides mortgage insurance?

Home loan insurance is provided by the life insurance companies. Many banks have tie-ups with insurance companies for insurance of home loan. Some lenders offer insurance for free while some may charge a premium for it, along with the EMIs.

Home insurance vs home loan insurance

Home loan insurance should not be confused with home insurance. Home loan insurance is a cover on the loan. The sum assured and insurance term are usually the same as the loan amount and term. Some insurers might have caps them. For example HDFC Life puts the cap for sum assured at Rs 30 lakhs and ICICI Prudential Life puts the cap for term at 30 years.

Few features- mortgage insurance

Most insurers give the option of paying either a single premium at one go or to include premiums in the EMI of home loan. The lender pays the premium all at once to the insurer in the second case. Insurers also offer the facility of decreasing sum assured. Under this arrangement, the sum assured decreases as the loan is repaid so the insured does not have to pay for the risk that does not exist. Being a life insurance product, section 80 C benefits can be availed on home loan insurance.

Do you need mortgage insurance?

Should everyone having a home loan buy insurance on it? If it comes for no charge, grab it. If you are adequately covered by life insurance and you have taken into account all your liabilities including home loan, you can skip it. Find out if it will be a cheaper option to top-up the sum assured on your term policy to make good for the increased liability than buying a separate home loan cover. Premium rates of many insurers can be found on their website. Home loan insurance can be the last resort. Amongst the various players, some offer accidental death benefit or permanent disablement rider apart from the life cover. Weigh all possible benefits before settling for one.

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