What is Home Loan/Mortgage Loan Insurance?
Home Loan/Mortgage Loan insurance is a plan that covers a borrower’s outstanding loan liability to hedge the risk of loss in case he/she dies during the loan repayment term. These policies offer a cover that reduces every year as the loan amount comes down. In the event of the death of the borrower during the tenure, the insurance company will settle the outstanding loan with the bank. A home loan insurance policy could lapse upon the full repayment of the loan or after the demise of the borrower or on the transfer of the loan to another bank.
The insurance premium broadly depends on four conditions
- Age: The lower the age, the lower the premium
- Amount: The lower the loan amount, the lower the premium
- Tenure: The lower the repayment period, the lower the premium
- Medical Records: The better the health, the lower the premium.
Benefits of insurance cover while taking Home Loan/Mortgage Loan
In case of the demise of the borrower, the insurance company settles the loan amount with the lender and the excess amount is paid to the customer
One can avail of tax benefits under Section 80C
One can opt for other riders in the home loan insurance policy, such as critical illness, disability or loss of job, where the loan amount will be covered not just in case of death but during the occurrence of the mentioned mishaps. These covers come at an extra cost.
All the above benefits depend on the policy type you have selected at the time of availing.