Ways to Protect your Home Loan

There is still a doubt in the mind of the borrower that if anything unexpected happens to him/her shortly, he/she cannot repay the balance of the home loan sum. The borrower would not want the burden of securing a home loan to collapse on the family following his or her untimely death. Life is unpredictable; this is a recurring feeling in the mind of the creditor since a long-term home loan will go up to 30 years. It is also sensible for borrowers to hold this idea in mind and schedule stuff accordingly. However, the procurement of home loan insurance is not necessary when borrowing from lenders like Indiabulls home Loan, including banks, NBFCs, or housing finance providers.

What is Home Loan Insurance?

Home Loan Policy, also known as Home Loan Payment Plan (HLPP) is a program provided by nearly any financial entity in which the creditor settles the unpaid or outstanding balance of the borrower's home loan with the lender or bank in the case of an unexpected situation including the default of the borrower.

Types of Home Loan Insurance Policy

Three forms of home loan insurance are categorized into the Level Cover Package, the Hybrid Cover Plan, and the Cover Elimination Plan. As listed below, these three categories differ based on insurance coverage:

The Level Cover package: In the initial year, there is complete coverage in a blended cover plan. Over time, however, as the balance number decreases, the coverage decreases as well. 

The Hybrid Cover package: The coverage remains the same during the loan term with this form of home loan insurance plan. 

The Reducing Cover Program: The coverage never stays the same in the Reducing Cover Programmed. Indeed, it decreases as the amount of the balance decreases.

Features of Home Loan Insurance

Before paying for one, it is advisable to know the attributes of home loan insurance policies. These are referred to below:

Payments: There is only a one-time home loan processing fee to be charged and not numerous insurance premium provisions on home loans. However, instalments of home loan insurance premiums are made in compliance with the EMIs. Thus, the value of the premium is allocated in recurring instalments, much as the amount of the principal loan. 

Implications for Balance Transfers: The results of home loan insurance can change in the case of home loan balance transfers. Often the new lender may decide on a separate home loan insurance package or may be happy with the previous one. Even, home loan policy can expire after the balance shift, and the lender may require you to start over insurance policies again. In the case of balance transfers, the restructuring of the home loan insurance policies should be assured.

Covers Joint Home Loan Borrowers: In the case of joint home loans, home loan insurance is not limited to any single entity. Indeed, the premium policy in the case of mutual loans extends to all co-applicants.

 Ways to Protect your Home Loan

There are several opportunities involved with home loan insurance programs. These include:

Security coverage: The primary advantage of a home loan insurance package is that it offers security coverage to both the provider and the borrower. If the lender is protected from incurring damages, the creditor is saved from heavy obligations during a moment of financial inadequacy.

Tax advantages: The premium paid on mortgage loan insurance offers tax benefits to borrowers close to those of a personal loan. Premiums charged are liable for tax deductions under Sections 80(C) and 80(D) of the Act. 

Flexibility and convenience: Home loan insurance premiums are typically paid at high rates. However, to make it convenient for home buyers, lenders, most of the time, club the premium number with daily EMIs. Thus, similar to the principal sum borrowed, the premium is often charged in instalments, which makes it easier for home borrowers.

Inclusive of Add-ons: Home loan insurance plans are of a very inclusive type when it comes to expanding policy opportunities. For example, home loan insurance offers compensation for different programs, including sickness, accidental death, or unemployment. However, suicides are not covered by the Home Loan Insurance Scheme. Additional incentives can be made possible by paying for term insurance for home loans.

Also Read:- Application Process for a Home Loan