Know More About Home Loan Protection Plans
Home loan protection plans (HLPP) are unique insurance plans for home loan borrowers. Simply put, this gives a lump sum benefit in the event of the death of the insured, which can be used to pay off the pending home loan amount to the bank or housing finance company. This basically helps to safeguard your decision of buying a home using a housing loan . That being said, it is important to know a few facts about this to make the best decision possible.
• It is a term insurance.
This cover works as a term insurance i.e. provides coverage at fixed rates of payments for a limited period of time. In case of death, the nominee gains full benefit, which is the lender, in case of a house loan. While most mortgage organizations have collaterals, this insurance cover is a great asset for the insurer as it can ensure that the borrower’s family don’t lose their house in the event of an accident.
• The premium is a very small amount.
Like term insurance, the premium on this is a small amount and can be paid annually or in a single payment. Most Indian housing finance companies also allow you to include it in home loans, if you don’t have sufficient balance for paying the premium.
• There are no benefits in the event of survival.
This type of policy has no benefits if the insurer survives. This drawback is the main reason why low cost insurance plans are available in the first place. However, this home loan insurance cover is valid for the entire duration of the loan. That makes it a great and affordable safety net in case of death as your home stays within the family. For most people, this is an important cover as their home is the largest asset for them.
• You can use term insurance for the same purpose.
If you already have term insurance of an equivalent amount and time period, you may not need to buy HLPP separately and can use the same. In most cases, people need to buy it as they don’t have an existing term insurance policy of equivalent value.
The safety of this policy is very important to people who do not have any major investments that can be used to repay pending amounts in EMIs. While this is not a necessity for people buying homes as an investment, it can be deemed as a requirement for self-occupied property purchases with housing finance.
