Important of Home Loan Insurance
Important of Home Loan Insurance. Buying a house on the basis of self-effort is an important aspect of one’s life. Owning a house is seen from an economic point of view as a kind of investment. Most middle-class people make their dream of owning housing a reality only through loans taken through banks or financial institutions.
Term
Home loans often have a tenor of more than 10 years. It is a known fact that a period of 10 years or more in an individual’s life involves various changes. It is worth noting that many people say that they have to spend a certain period of their life in the matter of repayment of bank loans.
Security
Financial advisors say that the focus should be more on bank loans with multiple years of instalments as changes in life remain unchanged. They note that insuring a home loan would be a safe and financially beneficial decision. Here’s a look at the information provided by financial advisors about home insurance.
Methods of Insurance
Generally, the best option is to insure the entire loan amount purchased. However, depending on the nature of the debt that is decreasing over time, the sum insured and the system of insurance that can be specified are in place. This means that the premium amount for the insurance can be taken as a loan along with the home loan at the time of receiving it. As the home loan decreases, the amount of ‘coverage’ for insurance will also be calculated as decreasing.
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Network
Financial institutions or home loan providers and banks ensure security for loans at multiple levels. Usually, the house involved is shown as security. The benefits of the insurance equivalent to the loan amount as a more secure method can be made available to the banks or financial institutions concerned and can be given as collateral for the loan.
Instalment Methods
Generally, financial institutions, including banks, work with insurance companies to calculate the insurance coverage and get it along with the home loan. Also, there is a facility to pay the insurance premium monthly while repaying the home loan.
In case of availing a home loan of Rs 20 lakh, it is recommended by financial advisors to take the same amount of insurance (term plan). If the tenor of the loan amount is 20 years and the claim for insurance is paid in a single instalment, it can range from Rs.70,000 to Rs.80,000. If that amount is paid in annual instalments, the amount can range from Rs.3,000 to Rs.5,000 per annum. The above amount can also be paid along with the home loan or paid personally.
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Many uses
If the house is damaged due to various natural reasons, there are suitable insurance plans for the same. By availing of this insurance cover, you will be able to get the damages and renovate the house. Usually, such insurance is taken away in the name of the house concerned by the home loan issuing company or banks. The total amount and instalments for the insurance will be as usual.
