Home loan insurance secures property
The Economic Times
Home loan insurance secures property
The economic Times
Kavita Sriram explains how this insurance cover works for home loan borrowers
The single-most expensive purchase that most people indulge in, usually once a lifetime, is buying a house. Homeowners invest their life's savings in their home. Ever wondered what happens if a huge fire destroyed your home or an earthquake ravaged it? It's hard to imagine your hard-earned money go up in smoke. Is there any way to ensure protection of your roof and its contents? Enter property insurance.
Property insurance provides protection against most risks to property from threats such as fire, burglary and earthquake. Open perils cover all the causes of loss not specifically excluded in the policy. In other words, it is insurance coverage for all risks other than those that the policy explicitly excludes.
Common exclusions on open peril policies include damage resulting from floods, nuclear incidents and war. Named perils require the actual cause of loss to be listed in the policy of insurance to be provided. In other words, it is insurance policy that covers only losses which result from causes specifically listed in the policy. It includes damage caused by fire, lightning, or theft.
When taking a home loan, some banks offer free property insurance. However, property insurance is not a prerequisite for applying for a home loan. Property insurance isn't merely about protecting your investment in your home. It also covers your valuable personal belongings, both inside and outside your home. Property insurance will reimburse you for losses if your home or personal belongings are damaged by fire, your belongings are stolen or some catastrophe strikes.
Read the fine prints in the policy. Do not compromise on crucial elements to save a few rupees and do not pay for covers you do not require.
The householder's insurance policy is designed to cover risks and contingencies faced by householders under a single package policy. It provides protection for property and interests, as well as legal liability of the insured and his family members who permanently reside with him. Instead of taking different policies you can opt for multiple sections or covers of your choice under one policy.
Home loan insurance plans provide cover to your home loan in the event of any unforeseen calamity happening in your life. If the breadwinner is unable to earn, what happens to his EMI repayments? With home loan insurance, your family will have the support of the insurance cover to pay for the outstanding home loan, without being burdened by the loan's EMIs.
Home loan insurance provides cover on housing loans. Let's assume the breadwinner dies during the term of the policy. The cover would provide a lump sum amount equal to the outstanding amount on the home loan. As the outstanding amount on the loan decreases over time, so does the cover under the policy.
