A dream for many is buying a home. But with that dream comes a big responsibility-the home loan. If something unforeseen happens to you, your family may struggle to pay off the loan. This is where term plan insurance comes to the rescue. Instead of worrying about loan repayment, your loved ones will have the financial security they need.
We would explain here how term plan insurance acts as a shield to your home loan insurance, ensuring that the family never gets burdened by EMIs. So, let’s get going. What is Term Plan Insurance?
The most cost-effective and easy way to protect your family financially is by term plan insurance. A small premium you pay, and if something goes wrong with you, your family receives a big fat payout. It’s that simple! And the best part is that you can use it for any expenses, your children’s education, and even home loan repayment.
What is a Home Loan Insurance?
Home loan insurance covers your home loan. If at any point, you pass away during the term of the loan, the money will be provided to the bank by the insurance company so your family won’t have to. However, insurance of this nature only pays to cover the home loan and other expenses aren’t covered. Hence, a much better option would be a term plan insurance
Why Term Plan Insurance is Better Than Home Loan Insurance
Lots of people feel that they need home loan insurance to secure their home loan. Well, here’s the truth- term plan insurance does the job even better and offers greater flexibility. Let’s compare both,
Full Financial Security- a home loan only covers the loan amount. However, the term plan insurance offer all money for expenses, including your family’s future needs.
Lower Premiums – A term plan insurance is much cheaper compared to home loan insurance, making it a more cost-effective choice.
More Flexibility – With home loan insurance, the money goes directly to the bank. But with a term plan insurance, your family gets to decide how to use the money.
Covers Multiple Liabilities – If you have other loans or financial responsibilities, term plan insurance covers everything, while home loan insurance only pays for the house loan.
Portable and Independent – Home loan insurance is tied to your home loan, but a term plan insurance stays with you even if you switch loans or pay off the house early.
How to Use a Term Plan Insurance to Pay Your Home Loan Insurance
Now that you know why term plan insurance is better, let’s see how you can use it to pay your home loan insurance:
Step 1: Calculate Your Coverage Amount
Coverage Required: Calculate your coverage requirements first. For a home loan amount of ₹50 lakh, getting a term plan insurance for a minimum of ₹1 crore will be very helpful. If your loan gets settled, this is enough money available for the dependents for various other requirements.
Step 2: Opting for the correct policy term:
Your term plan should be at least as long as your home loan tenure. So, if your home loan is for 20 years, then take a term plan insurance with a minimum tenure of 20 years.
Step 3: Choose a Reputed Insurer
Choose a reliable insurance company that has a high claim settlement ratio. This will ensure that your family won’t face any trouble in getting the claim amount.
Step 4: Nominate Your Family Members
Nominate your spouse, children or parents so the payout goes directly to them. They can then pay off the home loan without even having to make an application for its clearance.
Step 5: Choose Additional Riders (Optional)
If you want some additional protection, you can attach riders like critical illness cover or accidental death benefit to your term plan. They can provide more money in the event of extreme illness or accidents.
The Actual Benefits of Utilizing Term Plan Insurance for Home Loan
Now, let us take an example to understand how term plan insurance helps:
Story of Rajesh: Rajesh is a professional who is 35 years of age. He took a home loan of ₹60 lakh for 20 years. His bank offered him home loan insurance, but after comparing options, he chose a term plan insurance worth ₹1 crore instead. Rajesh passed away in the 10th year of the loan. His family received ₹1 crore from his term plan insurance, which they used to clear the remaining home loan. The extra amount helped his wife manage household expenses and his children’s education. If he had opted for only home loan insurance, then the amount would have been only for the bank, and there would be nothing left for his family as a financial boost.
Other Benefits of Term Plan Insurance
Tax Benefits – The premium you pay towards a term plan insurance is allowed as tax deduction under Section 80C of the Income Tax Act.
Peace of Mind – Your family would not worry about your absence due to a lack of financial burdens.
Affordable Protection– As compared to other insurances, term plan insurance provides higher coverage at a relatively affordable cost.
No Forcing to Purchase from Lenders – Several banks force individuals to purchase home loan insurance from them; however, with term plan insurance, you can choose the independent provider and get improved benefits.
Conclusion
Term plan insurance doesn’t just settle your home loan; it provides security for the future of your family. And unlike home loan insurance, term plans provide that money to help your loved ones in whatever situation they might find themselves in; it is affordable, portable, and fully secured.
So, if you’re planning to buy a house or already have a home loan, don’t just settle for home loan insurance. Choose a term plan insurance—a smarter, safer, and more effective way to ensure your family’s peace of mind.
Your home is not just a building; it’s your family’s future. Make sure it stays safe with the right protection!
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