Summary
A home purchase is an achievement for many, it is a longtime dream realized. As houses are very expensive assets, it is difficult to purchase your home through funds you have saved. Hence, you get a loan to finance the purchase. Once you have bought it, it is important to ensure the structure and contents of your house. You can search for the best home insurance plans online.
Body
A Home Loan Insurance does not protect the home. Instead, it ensures that the home loan outstandings get paid even if something happens to the borrower. A home loan insurance prevents the home loan from being an added burden on the family of the borrower.
Home Loan Insurance
You generally borrow a huge amount for buying a home. It can run from several lakhs to several crores. You may have the financial resources to keep up with the EMI payments on your home loan with ease. Still, this might change if something happens to you that cuts off the income you contribute towards your household budget.
A Home Loan Insurance is a policy that will take care of the remaining payments on the home loan in such a situation. You should exercise some care while buying a home loan insurance. Look at the policy terms, what it covers, and its exclusions.
How to Choose Home Loan Insurance
Many banks and NBFCs have tie-ups with third party insurance companies. If they sell the insurance products of these companies, the bank or NBFC will get a commission. So, the bank or NBFC you are getting a home loan from may try to offer Home Loan Insurance bundled in with your Home Loan.
This may not always be the best option. Generally, the bundled package translates into bigger EMIs on the Home Loan as the premiums for the home loan insurance gets added to your home loan premiums. The bundled home loan insurance may lack many features you want. It may also become difficult to transfer the home loan insurance if you refinance or do a balance transfer of your Home Loan to another financial institution.
When buying a Home Loan Insurance Policy, look for features like coverage for job loss, permanent disability etc. Also, make sure that the policy covers accidental death as well as the natural death of the borrower. This is why it is better to purchase home loan insurance as a separate product not bundled in with your home loan.
You have other options to cover your home loan outstandings in case you are unable to keep up with the EMIs for any reason. You can take a Term Insurance policy that will cover most of your loans and other liabilities. You can also put aside funds in savings and investments for such future contingencies.
Home Insurance Policy
Home Insurance is extremely important wherever you live. Yet, only a small percentage of homeowners bother to purchase home insurance, this too mainly in urban areas. Your home is a valuable asset and life is unpredictable. As you take measures to take care of your family through life insurance when you are not around, so you should take steps to ensure damage to your home and its contents.
Home Insurance Policies comes in two fundamental types – Building or Structural Insurance, and Contents Insurance. The first covers damage to the building due to varied causes, while the second provides cover for loss or damage to your possessions inside the house.
Generally, if you live in a rented house, buy a home content insurance policy that will cover your possessions. If you live in your own home, buy a good package policy that provides full cover for structural damages as well as loss of possessions.
A basic Building Cover is a Fire and Allied Perils policy that protects you financially against destruction caused by fire, storm, flooding of the house due to the broken water tank or plumbing, damage caused by impacts like road or rail accidents, lightning damage etc. It also provides protection against damage caused by malicious acts riots, acts of terrorism etc.
Generally, this basic policy may not cover devastation caused by the earthquake, flooding caused by broken dams, reservoirs, flooded rivers etc. You may have to add these as riders.
You can buy Home Insurance against Burglary and Theft including larceny. You can purchase a cover for Public Liability. This covers any expenses if personal harm or damage to property is caused to a third party due to damage to your building.
You can buy these as separate policies and get discounts offered by some insurers for multiple policies. You can also save money by purchasing a full cover like a Householders Package Policy (HPP) that covers your building as well as contents. These policies offer protection for your home and possessions under several sections, beginning with the Fire and Allied Perils policy. Under HPP, the plan usually covers flooding, earthquakes, and other disasters as well. You can tailor the options to get the best home insurance you want.
Home loan Insurance and home insurance policy are two different insurance products. The first covers your loan outstandings in case of your death, loss of income, or permanent disability. The second offers financial protection that can cover the cost of rebuilding your home if it is damaged by man-made or natural disasters. It can also help you by covering part of the cost of replacing your lost or damaged possessions inside the house.
