- Difference b/w both
- Parameters of both
- Which one to opt for?
Home Loan Insurance or Term Insurance: Which One to Choose?
Indeed, a house gives a sense of belonging, comfort, security, and stability. Do you want to buy a house of your own? Then, it would help if you opted for a home loan. The bankruptcy problem may arise when you use all your money to buy a house in one go.
You can prevent it by paying some part of your earnings in home loan EMIs. Now the question arises who will pay these EMIs if something happens to you? To curb this there are two options: buy a home loan insurance or attach your home loan with your term insurance plan.
There is no doubt that both plans are important financial tools for future planning since the main objective is to secure your family’s financial future. Let’s learn more about the difference between Home Loan Insurance and Term Insurance for home loans.
What is Home Loan Insurance?
Home loan insurance has become quite popular these days due to the surge in the real estate market after the pandemic.
Under this plan, the insurer will settle the outstanding home loan with the lender if something happens to the insured person. This type of insurance comes with extra benefits and offers an insured person the flexibility to add riders to enhanced base coverage.
Buying home loan insurance is essential because it’ll give you peace of mind that your dependents don’t become homeless in your absence due to outstanding EMIs.
What is Term Insurance?
Term insurance is another important financial tool to safeguard your family in your absence financially. In the event of the policyholder’s unfortunate death during the policy tenure, the nominee will receive a death benefit paid by the insurer.
If you’re the family’s sole earning member and have taken loans like education, home, or personal loan, then you must opt for a term insurance plan.
Basic Parameters of Home Loan Insurance and Term Insurance
Here we’ve noted down the few basic parameters of home loan insurance and term insurance in the table below:
| Parameters | Home Loan Insurance | Term Insurance |
|---|---|---|
| Premiums | Home loan insurance premiums are comparatively higher and may depend on a few factors, such as the loan amount, loan tenure, interest rate, and the borrower’s medical history. | Term insurance premiums have a relatively low premium rate, and it may depend on a few factors, such as age, medical history, and gender. |
| Protection | A home loan insurance plan offers protection against severe conditions, such as death, accident, or job loss of the borrower. It settles the loan in such circumstances. | Term insurance plans offer protection to their loved ones in the event of the policyholder’s unfortunate demise. It can even be used to settle any outstanding loans and ensure the financial burden does not fall upon your family. |
| Modification of the Cover | You’re not allowed to modify home loan insurance. | You have the flexibility to modify your term insurance plan by adding optional in-built riders to your base plan. |
| Tax Benefits | The premiums paid on the home loan insurance EMI annually are allowed as a tax exemption under Section 80C of the Income Tax Act 1961. | With term insurance, you can avail of tax benefits of up to ₹1.5 lakhs under Section 80C of the Income Tax Act 1961. Under Section 10 (10D) of the Income Tax Act 1961, you can claim the tax deduction on the death and maturity benefits. |
| Add- Ons | Home loan insurance comes with optional riders to enhance their base cover, such as terminal or critical illness, accidental death, unemployment, disability, Etc. | Term insurance riders allow you to increase your base cover at an additional cost. A rider such as waiver of premium, income benefit, accidental death benefit, disability, terminal or critical illness. |
What Should I Choose Between Home Loan Insurance or a Term Plan?
Term insurance is not the same as home loan insurance. When it comes to choosing between home loan insurance or a term insurance plan, it is advisable to opt for a term insurance plan because it offers overall coverage to the insured person’s family. It’ll give you peace of mind that your loved ones will be cared for financially in your absence, even during your home loan tenure. With a term plan, you can get security or protection at the same time.
Conclusion
Hopefully, now you know the basic perimeters of home loan insurance and term insurance, so it’ll be easier to understand which one best suits your needs. Choosing between a home loan and term insurance may solely depend on the individual’s needs and circumstances.
Home Loan Insurance vs Term Insurance: FAQs
1. Can I link term insurance to a home loan?
Yes, you can link your term insurance plan to your home loan. If something happens to you during loan tenure, the insurer will pay off the remaining debt.
2. Is term insurance mandatory for home loans?
Purchasing term insurance coverage while taking a loan in India is not mandatory, but it& 039;ll be useful in tough times.
3. Can I cancel my home loan insurance after one year?
Yes, you can cancel your home loan insurance at any time. However, you will not get any refund for your premium.
4. How can I claim my home loan insurance?
You can claim your home loan insurance by contacting the insurer via mail or by calling them.
5. At what age is it beneficial to get life insurance?
Typically, the best time to buy life insurance is when you are young. As early as 18 years.
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Written By: Sahil Singh Kathait
A boy-in-squares bagging escapades of switching streets in groove & sensing musical airy-notes from 6 1". Under wayed nyctophile sketching the walls of life from the panorama of anime.
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