What is Home Loan Insurance?
Many people take loans to buy a house. A home loan is a big loan that takes 15 years or more to pay back. Sometimes, bad things happen that make it hard to pay the loan. Maybe someone loses their job or the person who earns money for the family passes away. Home loan insurance helps in these situations.
Home loan insurance is a plan where an insurance company pays the remaining loan amount to the lender if the borrower cannot pay. The borrower pays a premium (a small amount of money) to the insurance company for this protection.
Paying for home loan insurance also gives tax benefits. This insurance helps both the lender and the borrower. The lender is sure to get their money back, and the borrower’s family will not lose their home if something bad happens. Let’s take a look at the best home loan insurance in India.
Types of Home Loan Insurance
There are two main types of home loan insurance
- Term Insurance
Term insurance covers all debts and loans. The sum assured (the amount the insurance company will pay) stays the same for the entire loan period.
If the borrower cannot pay the home loan, the nominee (a person chosen by the borrower) will get the sum assured.
The nominee will then use this money to pay the lender. The premium paid for term insurance can be deducted from taxes (tax benefit).
- Home Loan Insurance
Home insurance only covers the remaining home loan amount. The coverage amount keeps getting smaller as the loan amount is paid off.
If the borrower cannot pay, the insurance company will directly pay the remaining loan amount to the lender.
If the lender sells the insurance and includes the premium in the loan EMI (monthly payment), there may be no tax benefit.
It is better to take home loan insurance for the full loan period. Renewing a shorter insurance plan can be more expensive.
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Best Home Loan Insurance in India
Here are some of the best home loan insurance plans in India:
Bajaj Allianz Home Insurance
- Covers fire, burglary, loss of documents, and more
- Provides personal accident cover
- Covers loss of rent and alternate accommodation expenses
- Covers loss of baggage and third-party liabilities
- Offers terrorism cover
Bharti AXA Home Insurance
- Automatic 10% increase in sum insured for newly purchased goods
- Covers fire, burglary, loss of documents, and more
- Provides personal accident cover
- Covers loss of rent and alternate accommodation expenses
- Covers loss of baggage and third-party liabilities
- Offers terrorism cover
Cholamandalam Home Insurance
- Covers fire, burglary, and breakdown of home appliances
- Provides all-risk cover for jewelry
- Covers loss/damage to personal baggage and fixed plate glass
- Provides personal accident cover and temporary relocation cover
- Covers pet animals, gardens, and education benefit
- Offers terrorism cover
Future Generali Home Insurance
- Covers fire, burglary, and protection of valuables
- Provides protection for electronic equipment and portable computers
- Covers personal accidents, public liability, and veterinary costs
- Covers home loan EMI, baggage loss, and misuse of credit cards
- Offers enhanced protection covers like plate glass and ATM cash withdrawal
IFFCO Tokio Home Insurance
- Offers worldwide coverage of personal liability
- Covers fire, burglary, and breakdown of domestic appliances
- Covers the loss of rent, pets, money, trees, and plants
- Offers accidental medical benefit and escalation clause
National Insurance Home Insurance
- Covers fire, burglary, and jewelry/valuables
- Provides coverage for plate glass, TV sets, and breakdown of domestic appliances
- Covers pedal cycles and personal accident
- Offers baggage loss cover
New India Assurance Home Insurance
- Offers savings options on opting for more sections
- Covers fire, burglary, and breakdown of domestic appliances
- Provides coverage for jewelry, valuables, TV/desktop, and pedal cycles
- Covers personal accident and public liability
- Offers earthquake and terrorism cover
Royal Sundaram Home Insurance
- Provides escalation benefit for long-term policies
- Offers zero depreciation cover under the Diamond plan
- Covers fire, burglary, and electrical/mechanical breakdown
- Provides coverage for temporary resettlement, loss of cash, and accidental damage
- Covers baggage loss, mobile equipment, and third-party liabilities
- Offers rent for alternate accommodation and personal accident cover
SBI Home Insurance
- Offers worldwide personal accident cover and global coverage for jewelry/valuables and baggage
- Provides cumulative bonus under PA cover and savings options
- Covers fire, burglary, and breakdown of domestic appliances
- Covers baggage loss, public liability, and plate glass
- Offers rent expenses for an alternate accommodation and terrorism cover
Universal Sompo Home Insurance
- Covers fire, burglary, and robbery Provides all-risk cover for jewelry and valuables
- Covers plate glass, breakdown of domestic appliances, and electronic equipment
- Offers personal accident cover, baggage insurance, and public liability
- Provides terrorism cover
Home loan insurances are usually single premium plans, which means you pay the premium only once.
The premium is added to the loan amount, and then the EMI (monthly payment) is calculated. When the loan is fully paid, the insurance policy ends.
These insurances may also offer additional benefits called riders, coverage for terminal illness, accidental death, job uncertainties, and disability. These riders provide better protection but cost extra.
Choosing the Right Home Loan Insurance
It is generally better to get a term insurance plan if you can pay regular premiums. Term insurance covers all loans and debts, not just the home loan.
If you cannot pay regular premiums due to an uncertain income, you can opt for a home loan insurance plan. However, be careful when the lender sells the insurance, as they may try to sell it even if you don’t need it.