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HLPP Vs Term Insurance – Which is Best if You Have a Home Loan?

Updated On May 03, 2021

Home Loan Protection Plan (HLPP) is a type of an insurance plan in which the company pays the outstanding home loan amount in case of the demise of the borrower, HLPPs protects the family of the borrower from the burden of making EMI payments.  In Term Insurance, the company protects the life assured financially for a specified period of time and a death benefit is payable to the nominee in case of the death of the life assured. Both HLPP and term insurance are somehow similar but some differences arise.

HLPP Vs Term Insurance

The following are some differences that may assist you in judging the best insurance plan if you have a home loan:

1. Premium Cost

Term plans require frequent premium payments based on the term of the plan chosen while HLPP is a one time investment. The premium in term plan is less as compared to the premium of HLPP as single payment of premium requires larger funds. A term plan is more beneficial for a home loan because the premiums are affordable and can be modified within the term of the plan. 

2. Life Cover

The term plan provides life protection cover which is payable as death benefit in case of death of the life assured, the same death benefit can be used for any financial requirement such as payment of home loan amount, marriage and permanent income source etc. while HLPPs are only entitled to cover the home loan amount in case the borrower dies, no other financial requirement can be fulfilled through HLPPs. Term plans are better if you have a home loan because it protects your family from uncertainties while providing cover to your financial needs such as repayment of a home loan.

3. Span of Coverage

A term plan provides life cover in the form of death benefit payable on the death of the life assured whereas HLPPs only covers the sanctioned home loan amount. The death benefit in the term plan can be used for several financial purposes but the same is not the case in HLPP because the amount received from the insurer on the demise of the borrower can only be used for a sole purpose of home loan repayment. After the payment of the loan amount, the risk cover becomes nil whereas in term plans, the cover may continue even after the death of the life assured. 

4. Change in Policy Term

In term insurance, the policy term can be modified as per the requirements of the life assured. However, in HLPP, even if your loan tenure changes the policy term is not allowed to be further modified. Term plans are better than HLPP, if you require substantial flexibility in the policy term as per your loan repayment capabilities. 

5. Benefit of Alteration

The amount covered in HLPP may decrease on the basis of the outstanding funds required for the repayment of the loan. Whereas no such alterations are made to your death benefit in case of any uncertainty occuring to the life assured. 

Take Away

HLPPs are more popular among lenders, but as a borrower if you desire a plan which benefits your family financially in every possible way then, term insurance is a better choice for you in case you have a home loan. If you choose to purchase the term plan, there exists no need for an additional HLPP.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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