Home Loan insurance or term policy: Which is ideal?

Summary: Home loan insurance cover is crucial to safeguard your family’s interest in the asset. Home loan insurance or term policy - which one is ideal? Find out now!

29 Sep 2022 by Team FinFIRST

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Buying a home is a major life goal for most of us. Easier access to digital mortgage plans and customisable repayment schedules have made it possible for millions of Indians to fulfil their dreams of owning a house. Given that mortgage tenures usually range from 20 to 30 years, it is important to structure the right EMI plan for stress-free loan repayments. However, it is equally important to plan for a contingency if something unforeseeable were to happen before the loan is settled.

Home loan protection plans safeguard you and your family’s interest in the asset, and so does a term plan.

So, should you opt for a home loan cover policy or just go with a simple term cover? Before you know how to secure a home loan coverage or a term insurance policy, here is a quick look at their different features and benefits to help you make the right decision.

Scope of coverage

While both policies provide financial assistance, a home loan insurance plan exclusively covers the liability due on the property. In contrast, a term plan can offer coverage for various other family needs.

Sum assured

The value of coverage on a home insurance plan is equivalent to the outstanding liability on the home loan. In the case of a term plan, policyholders are free to select a cover that can help the family settle all liabilities and fulfil other life goals such as children’s education or creating a retirement cushion for the spouse.

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Beneficiary

With home loan insurance plans, the mortgage agency is the beneficiary. If the borrower is unable to repay the loan owing to loss of income, disability, or untimely death, the outstanding amount on the loan is paid out to the lender. In the case of a term plan, the beneficiary is a nominee of your choice, usually a spouse, child, or parent.

Tenure

The tenure of a home loan protection insurance is equivalent to the tenure of the loan. Once the loan is repaid, the tenure ends. A term plan can be taken for a tenure of your choice till the age you have responsibilities and/or debt(s) to repay.

What should be your choice?

Take the decision between a dedicated home loan insurance cover or a term plan after considering all the above factors. If you already have a term plan for your family, you may not be eligible for another based on Human Life Value (HLV) calculations and will have to opt for a home loan cover instead.

Conversely, if you have the financial means to service premium payments for a term cover that will take care of your home loan and other family needs or goals, you can save the trouble of having multiple insurance policies by assigning the existing policy for covering home loan.

Look no further than IDFC FIRST Bank’s bespoke advisory for curated life insurance solutions. Get expert advice on your coverage needs, or get started with a rough estimate with the term insurance calculator. IDFC FIRST Bank offers multiple term plan options with higher sums assured at affordable premiums, longer tenures with whole life cover till the age of 99, and tax benefits on premiums paid under Section 80C.

Make your home a happy and secure one for generations with IDFC FIRST Bank term insurance!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.