Borrowers should keep this in mind and organize their finances properly. However, obtaining home loan insurance is not required when taking out a loan from a lender such as a bank, an NBFC, or a housing finance company. According to regulatory agencies like the RBI and IRDAI, purchasing a home insurance plan is not required if a borrower obtains a home loan from any financial institution.
Home Loan Insurance, which is also known as Home Loan Protection Plan (HLPP), is a scheme offered by almost every financial institution in which the insurer will settle the borrower's outstanding or balance home loan amount with the lender or bank in the event of unforeseen circumstances, which may include the borrower's death.
Home Loan Protection Plan (HLPP) or Home Loan Insurance is a type of insurance plan. In the event of the borrower's death, the insurance company settles the rest of the loan with banks, NBFCs, or housing finance companies.
Typically, the policy period corresponds to the loan term. By purchasing Home Loan Insurance, the borrower ensures that even after his or her death, his or her family will not be required to repay the home loan or abandon the home due to non-payment of the loan amount.
Lenders do not want their loans to become bad debts. They would wish to safeguard their funds. Lenders require home loan insurance to prevent a home loan from becoming a major burden. If the borrower dies, the lender will lose a lot of money, especially if the borrower is the single earning member of the family.
When the borrower does not pay his or her bills, the home loan insurance plan will cover the outstanding loan amount. Such a predicament could emerge as a result of the borrower's employment insecurity or death. You can select a standard plan or one with additional features and greater coverage for riders. Home loan insurance is vital for borrowers since it assures that the borrowers' dependents do not become homeless during his/her absence or in a crisis circumstance.
Best Home Loan Insurance Policy in India
In a Hybrid cover plan, the insured's coverage amount remains constant during the first year but gradually decreases from the second year onwards as the outstanding balance on the house loan decreases.
The coverage amount under the Level cover plan remains constant throughout the term of the home loan.
The coverage amount reduces with this plan as the outstanding house loan debt decreases.
Term insurance and home loan insurance provide nearly identical benefits. However, there are significant distinctions between house loan insurance and home insurance. Let's look at the key distinctions between the two.
Home Loan Insurance Benefits