Why Should You Protect Your Home Loan with Term Insurance?
With the wide availability of home loans in the market, owning a home has become easy. However, in case of any unfortunate occurrence, to ensure that your family does not have to bear the financial burden of repayments of your loan, a term insurance policy can provide a backup.
For many people out there, owning a home is an important financial milestone that requires endless years of disciplined savings and planning. To achieve this dream sooner than usual, many people resort to the option of raising home loans.
With the increasing competition in the market, the rates offered on these loans are attractive and economical. Although these loans can be raised easily, many people are still not very keen on availing them due to the risk it holds, i.e. the lender can seize the property in case of non-repayment. For instance, the breadwinner of the family meets with an unfortunate situation and is not around anymore. This means there is not a constant inflow of income anymore, and therefore the repayments cannot be honored, this would give the loan provider the right to seize their home.
To avoid any such scenario, it is advised to anyone who is seeking a home loan to first have a term insurance policy in place. A term insurance plan provides protection to the policyholder for a specified tenure. If the insured passes away during the term of the policy, then a sum assured known as the death benefit is given to the appointed nominees. This death benefit can be used as an income to honor the home loan repayments in case of any unforeseen situation.
Why Should You Protect Your Home Loan?
Home loans are long term contracts usually ranging up to a period of 25 years. The concept of home loans is based on the ultimate assumption that you will work through the period of loan repayment and there will be a regular flow of income. However, with the uncertainty of life, in case of any unforeseen occurrence cuts off the regular flow of income, the repayment of the loan can be a huge burden on your family. This is why it is advised to cover the loan. In case of an untimely demise of the borrower, the payout from the term insurance policy will act as a financial shield and help your family in paying off the outstanding amount on the home loan.
Below mentioned are some reasons to consider a term insurance plan, especially if you have raised or are planning to raise a home loan:
Large Cover at Affordable Premium Charges
Term insurance is a pure protection plan, it is one of the simplest and most affordable life insurance covers that provide a large scope of coverage at affordable premium charges. If you are holding a home loan, it is important to consider getting an equal amount of coverage. If you opt for a term plan cover, it will give you peace of mind knowing that your family can honor the repayments in case of any eventuality.
Fixed Benefit is Offered
Many insurance providers offer a life insurance cover that acts as a home loan protection plan. The cover of the policy is relative to the schedule of your home loan repayment. As you make regular payments of your home loan, the outstanding principal on the loan decreases, and so does the life cover. The purpose of such insurance plans is to provide coverage for the loan and not your life.
However, unlike a loan protection plan, the payout offered under a term insurance policy remains constant throughout the life of the plan. The sum assured can be used for any purpose such as the repayment of the outstanding home loan, and any other financial obligations that your family may face when you are not around.
Provides Support During Home Loan Transfer
When you opt for a term insurance plan coverage from any insurance provider, the benefits of the plan stay with you irrespective of the provider. Even if you make the decision of transferring your home loan from one lender to another, your term insurance cover will remain intact and does not require you to re-apply for the same.
Even after the term of the loan is completed, your family is still financially protected by the term policy. This acts as a safeguard against any other outstanding liabilities or financial goals.
To Further Conclude
The market is flooded with different kinds of life insurance products. Before opting for any particular instrument, it is important for you to compare the different term insurance policies available that will act as a backup for your home loan. You should be absolutely sure that your policy covers all your debt requirements and needs. This ensures that your family is completed protected in case of any eventualities.