Home Loan Insurance: Shielding Your Home

Buying a home is often the largest investment a person makes in their life, and for many, this necessitates the use of a mortgage to finance the transaction. It is critical to consider getting home loan insurance to protect both your investment and the obligations that come with owning a mortgage. This article provides a useful overview of home loan insurance, highlighting its benefits and significance.

What is Home Loan Insurance?

Home Loan Insurance, also called Home Loan Protection Plan (HLPP), is a program that practically all financial institutions offer. In the event of unanticipated events, such as the borrower’s death, the insurer will pay the borrower’s outstanding or remaining home loan amount to the lender or bank.

One type of insurance plan is the Home Loan Protection Plan (HLPP), also known as Home Loan Insurance. When the borrower dies, the insurance company pays the remaining loan balance to banks, NBFCs, or housing finance companies. The policy period usually corresponds to the loan term. By obtaining Home Loan Insurance, the borrower ensures that, even if they die, their heirs will not be forced to stop making loan payments or vacate the property due to nonpayment.

Importance of Home Loan Insurance Cover

Lenders hope that their loans don’t turn into bad debt. They would want to protect their money. To keep a house loan from becoming a significant financial burden, lenders demand home loan insurance. The lender will suffer a significant financial loss in the event of the borrower’s death, particularly if the borrower is the only provider for the family.

If the borrower fails to make their monthly payments, the home loan insurance plan will cover the remaining loan balance. A situation like this could arise as a result of the borrower’s death or unstable employment. You can choose between a basic plan and one with more features and better coverage for riders. Because it guarantees that the borrower’s dependents won’t become homeless while they are away from home or in an emergency, home loan insurance is essential for borrowers.

Why Should You Have Term Insurance for Home Loans?

  • Affordable Premiums: It makes sense to combine your term insurance policy with your home loan because term insurance policies are reasonably priced. Therefore, you can safeguard both your family’s financial future and your home loan by purchasing a single plan with a single premium. In this manner, getting insurance for your house and your loved ones won’t cost you more.
  • Changing Lenders: You may be able to change the lender for your current home loan with the help of an independent term insurance policy. You can accomplish this without giving up the term insurance premiums you paid for your house loan. When it comes to home loan protection plans, switching lenders entails forfeiting any premiums already paid and beginning over. You have the option to switch lenders with your term policy. You can continue to safeguard your family’s interests by paying term insurance premiums according to the premium payment term once you have finished repaying your home loan.
  • Analyze Policies: When obtaining a home loan, many lenders include a standard protection plan that might not meet your specific requirements. Comparing and selecting your home protection plan is often limited in scope. Opting for a term plan gives you the advantage of selecting your life insurance provider and evaluating their term policies to find the one that best suits your needs. Additionally, home loan protection plans may include commissions for intermediaries, unlike when you choose your term insurance for home loan protection.
  • Guaranteed1 Benefits: This is a guaranteed amount that will be given to your family if you pass away. This implies that in the event of your untimely death during the policy term, your family will be protected by your term plan. Regardless of the amount of the outstanding loan, your family can live comfortably even without you if you choose a higher coverage amount. Furthermore, the death benefit amount guaranteed can easily cover the repayment of any outstanding EMI installments, relieving your family of any financial burden.

Home Loan Insurance Benefits

  • Tax Benefit: Investing in a home loan protection plan is a great way to receive a tax deduction. You can write off the insurance premium you paid under Section 80C.
  • Affordable: The one-time premium method is used for property insurance on home loan policies, where the premium is paid all at once. The premium can be added to the loan amount and subtracted through EMI if the borrower’s family is unable to pay it. As a result, paying the premium is less expensive.
  • Protection: It could be challenging to repay a loan on someone else’s behalf. The collateral used to secure the loan could be taken if you are unable to pay it back. You won’t be able to reach that point with home loan insurance. It guarantees that, in the event of the death of a vital family member, the borrower’s family will not experience a difficult time. 


Q1. Can I deduct my home insurance taxes?

A. Yes, the borrower is qualified for a tax deduction under Sections 80C and 10(10D) if they pay the premium themselves. Rs. 1.5 lakhs is the maximum amount that can be claimed under Section 80C.

Q2. How much insurance is needed to qualify for a house loan?

A. To ensure a stable future for your dependents, it is recommended that you purchase term insurance that pays at least ten to fifteen times your yearly income. An Rs. 1 crore term insurance policy will be adequate if your annual income is between Rs. 5 and Rs. 10 lakh and you have no financial obligations.

Q3. Does obtaining mortgage insurance become mandatory?

A. Most financial institutions offer home loan insurance in addition to a house loan. Getting home loan insurance in addition to a house loan is not necessary, but it is advised.

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