Wednesday, 19 November 2014

Insurance cover for home loans

 Insurance cover for home loans
If one is anxious about the repayment of their home loan in case of something unfortunate happening to them before the loan is paid, or if they are worrying that their family will be made liable for repayment if they pass away, they can now rest their anxious mind, as there is a way. Those Borrowers, who have taken large loans, can get home loan insurance cover for just a small monthly premium so that the outstanding loan gets repaid in case the borrower passes away during the loan term.
Those Borrowers, who have sufficient alternate sources of income, other investments or savings to help them in a time of crisis, cannot avail of this insurance cover. This cover is only meant for those who do not possess any other source of money. Availing of this insurance cover will give them insurance and freedom from anxiety by paying a small premium.
Certain lenders offer free home loan cover while some have tie-up with a life Insurance Company. Negotiated group rates are usually offered by such plans. If the premium amount is put together with the EMI, it is simpler to make repayments. Should the Borrower make up his mind to make a one-time payment for the insurance cover, that amount and EMIs will be calculated on the total sum.
The premium for the cover depends on four things-loan amount, tenure, age and health of the borrower. If the amount is high the premium will be higher, and if the tenure of the loan is long the premium will be on the higher side. Borrowers, who are younger, will have to pay lower premiums, while those who are older will have to pay higher ones. Those, who have ailments like a heart disease or blood pressure, will have to pay more premium than those who are in good health.
Some Borrowers, prepay their loan ahead of the tenure for example in eight years approximately. If they have paid the insurance premium for the whole tenure of the loan, they may get a refund. They should find out whether the Company will give them a refund on the excess amount that they have paid.
Banks that insure home loans now offer exclusive home insurance plans with many benefits. If it is a joint loan one will have to take out two policies in the names of the Joint Applicants and amount for the premium would be double. If any one of the Applicant dies, the Insurance Company would take over the loan.
If one pays the life insurance premium they are entitled for deduction according to Section 80C. When the premium is clubbed with their Equated Monthly Installments (EMI) payments the principal payments will still get a deduction under Section 80C and the interest payments will get a deduction under Section 24. A Borrower’s taxable income can be brought down by that amount.
This loan cover policy is only a risk cover. It provides a lump sum on the Borrowers’ death during the loan tenure. This will be a decreasing percentage of the initial sum assured and will get less with the passage of time. As it is only a risk cover plan, paid if he/she survives up to the end of the term of the policy.

Therefore, considering all these provisions it is good to avail of this exigencies which may occur and they may have no control. It will give a much-needed security to their family as well.

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