Everything You Need To Know About Home Loan Protection Plan In India

Everything You Need To Know About Home Loan Protection Plan In India

Owning a roof today stands as a quintessential priority in most of the lives. Yet people tend to suppress their necessity because of financial instabilities. Residential property rates are touching the skylines today making it even more tough for people to become a house owner. Home loan is a process which has eased up the house purchasing process. Many financial organizers are extending their lucrative offers to motivate more and more of aspiring owners to fulfil their dreams.

Since, home loan is an expensive affair, most of the borrowers continuously fret from the undetermined and unfavorable times. In several cases only one person is responsible to earn the livelihood of the entire family. In such cases, it is essential to secure the loan amount through insurance/ protection plans. Several lenders have made this a mandatory policy to take the loan insurance while borrowing the money.

What do you understand by a Home loan protection plan and what are its features?

Lending a huge amount can trigger the uncertainties of a borrower. In unfortunate cases such as – accidents, unnatural deaths or any mishap of the borrower, the outstanding home loan amount is settled within the lender and insurance company. The family is no more asked to pay the remaining value. In addition to it, they are handed over the property papers along with the receipt of loan closure. This whole process is acknowledged as home loan protection plan. The policy is valid throughout the tenure of loan. Yet it is not a mandatory practice today and is solely for those who want to consider having this as a safe measure. If one is interested to opt for the policy, he then will be asked to pay the premium along with the rest of his monthly installments. The EMI can be calculated by self through online Home loan EMI calculator. Features of home loanprotection/insurance plan are as follows –

a) In case the lender is disabled, died in an unnatural incident, the mortgaged property will be set free of any outstanding amount. In addition to these circumstances, the policy also covers for natural disasters such as – cyclone, earthquake, floods etc.

b) The policy is also valid in the case of joint loans.

c) The premium can either be adjusted with the ongoing EMI or paid at once. The EMI can be furthermore calculated through home loan EMI calculator for a better clarity.

d) By additional top – ups, once can cover up the repayment of loan in medical emergencies such as – cancer.

e) Home loan protection plan is not valid for natural death and suicidal commits.

f) Tax benefits can be claimed under Section 80C and 80D for the home loan protection plan.

How many types of Loan protection plan are there?

There are three levels of coverage plan which are mentioned below –

a. Level cover – In this plan, the coverage will remain constant throughout the tenure of home loan.

b. Hybrid cover – In Hybrid plan, the coverage for loan amount remains same for the first year and then decreases with respect to the time and borrowed money.

c. Reducing cover – As the name suggests, in reducing cover, the coverage will decrease with time and outstanding money since day one.

Home Loan protection plan VS Term Insurance –

Term Insurance is a type of life insurance policy which is beneficial for the specific amount of years. In this plan, if the candidate dies an unnatural death, his nominees will be getting the money which can be further used to repay the outstanding loan value. While,Home loan protection plan is specifically beneficial to protect the pending loan amount. In this case, if the borrower dies or some natural disasters take place disturbing their finances, the outstanding amount is settled within the insurance company and the financial lenders.

If you are looking for a policy which can vouch for your loan during the tenure, home loan protection plan can be taken. It will abolish the efforts of the nominees to clear the outstanding amount themselves.

Eligibility Criteria to apply for a protection plan –

In order to avail for the home loan protection plan, you should adhere to the following eligibility criteria –

  1. The candidate should be at least the age of 18 years and must be a citizen of India.
  2. Original documents of the health record with all the necessary tests.
  3. Ongoing loan in a recognized governmental or private financial institution.
  4. Good credit score and should be above 750.
  5. Some organizations consider the health of the property before agreeing on the insurance/ protection.

How do I apply for Home loan insurance policy?

The process of applying for the loan insurance policy is very simple and straight forward. While you are applying for your Home loan process, you can opt for the insurance policy instantly. The banking organizations have tie ups with several protection plan providers. If you fit into the above- mentioned eligibility criteria, you can perform following steps to have one policy on your loan amount –

a) Selection of coverage – There is provision of three types of insurance coverages. From full till reduced coverage plan, you should be able to select one and proceed further.

b) Fill out the application form – The insurance providers will be giving an application form asking for all your basic details for the record along with 2 passport size photographs.

c) Document Verification – This is the most vital step out of all. You should be able to deliver them the required original and copy of the documents at the time. Some of the mandatory documents are as follows –

. Identity proof – Adhaar card, PAN card, driving license etc.

. Proof of address – property papers, Utility bills.

. Loan documents, receipts.

. Proof of Income – Pay slip, turnover reports.

This was everything you need to know about home loan insurance plan. You can dig into the details and decide whether you want to opt for it or not.