A feasible way to buy that dream home of yours is through a home loan. Additionally, you may or may not be aware of a home loan insurance.While it is not a mandatory purchase, home loan providers often advise you to opt for a home loan insurance. It offers a sum of money at the time of death and secures your family’s future. This makes it conceptually similar to a term plan. Hence, the question begs to be asked, why choose one over the other. To know this, you need to learn more about these products:
Home Loan Insurance
A home loan insurance covers you against repayment risks of home loans. Life is uncertain and as a home loan borrower, you have to ensure that you make repayments on time. Hence, in the instance of your untimely demise or disability, your insurance provider will cover your outstanding home loan.Essentially, your family does not have to bear the burden of a home loan.
Term Plan
A term plan does something similar as a home loan insurance, but at a bigger scale. A term plan offers your family a lump sum amount in case of your sudden death. Moreover, with a customizable plan, you can also include the income benefit, which provides a steady income to your family for few years after your death. If you have an active home loan before your death, the term insurance benefits can be used to clear the debt. Moreover, in case of a term plan, you are likely to have money left after your pay your debt, depending on your term insurance coverage.
Which One Should You Buy?
Term plans are low-costplans and are purelya risk coverage product. Home loan insurance and term insurance plans have many similarities. Some of these include add-ons like critical illness cover, disability cover, unemployment cover, etc. based on your insurance provider. Both have a no maturity benefit. However, they differ in many ways.
Term insurance plans qualifyfor tax benefits. The premium you pay for these plansallows you to claim a tax benefit of up to ₹ 1.5 lakh.When it comes to premiums, term insurance is one the most affordable insurance plans you can find. Moreover, they offer a huge amount of coverage for a low price.
As per its base function, a term plan pays your family the death benefit. But the money you receive can be used for any purpose. On the other hand, a home loan insurance plan covers only the amount that is outstanding in your home loan. Hence, the sum assured in the policy will get lower as you make more repayments. Once you pay the loan completely, the sum assured becomes zero. Moreover, if you take a term plan, you can increase the sum assured to adjust all your family’s needs in the future, including a home loan, however, a home loan insurance plan does not allow you to do that. Use a term insurance calculator to determine your ideal coverage amount.
