Life Insurance for People with Home Loans

Although purchasing an insurance cover while taking a home loan is not compulsory, financial advisors often recommend having a cover to deal with unforeseen events. The choice between the plethora of insurance policies should be made according to individual needs. Here, you can consider buying a life insurance policy as the benefits provided are favorable for people with home loans. The right life insurance policy with the sum assured 10 times the sum of the annual income and loan payment amount can help save your family from a debt trap after you. Read on to more about how a life insurance policy is beneficial for people with home loans.

Benefits of Life Insurance For the Person With a Home Loan

Here are some benefits of having a life insurance policy if you have a home loan. 

1. Affordable Policy

A term life insurance policy is far more affordable than a home loan protection plan as the competitive rates on home loans can make it unaffordable for the common people to avail them. A home loan protection plan offers a single-premium payment mode. So, if the insurer charges Rs.8,000-15,000 as the annual premium amount on a term insurance policy with Rs. 1 crore as the sum assured amount, the exact cover might cost approximately Rs. 50,000 under a home loan protection plan.

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2. Reduce Financial Burden

The home loan protection plan is a long-term commitment contract that goes on for 15-30 years. So, suppose something unfortunate happens to you. In that case, the burden of loan repayment shifts upon your already grieving family and dependents as the cover decreases with the fulfilment of each repayment obligation, leading to a financial strain. Here, a life insurance policy will provide death benefits to help pay the loan obligations, which can be purchased at affordable prices.

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3. Life Cover

The home loan protection plan offers loan coverage for the sanctioned loan amount. Hence, the cover amount keeps on decreasing with each loan repayment instalment and gets exhausted by full loan repayment. On the other hand, a life insurance policy will continue to provide life coverage to the life assured and his/her family, even after the loan repayment. Moreover, some plans also offer maturity benefits after the completion of the policy duration.

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4. Freedom to Use the Death Benefits According to Nominee’s Needs

A life insurance policy provides the freedom to the nominee to utilize the death benefits provided after the life assured's death according to his/her financial requirements. These can be either paid for a loan or debt repayment or facilitate the children's education. In contrast, a mortgage life insurance plan provides just enough coverage to fulfil the pending loan obligations, which becomes the sum assured of the policy. Hence, no benefits other than mortgage repayment are provided under this.

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Takeaway

The policy should be purchased after carefully reading all the terms and conditions of the plans to ensure that it will protect against the home loan obligations and meets all your needs and requirements. You can even consult an insurance agent or a financial advisor to help compare different policies offered by various insurance providing companies.