Getting insurance policies is the best way to protect yourself from future liabilities. Before buying your dream home, you may be advised to both home insurance and home loan insurance.
So, what is home insurance?
It is an insurance policy that offers protection against any structural damage to your property during man-made or natural calamities. The home insurance amount is determined based on the value of the property in the market.
Features of a home insurance policy
- A home insurance policy protects you against any structural damage to your property.
- It covers the losses in the case of natural calamities, such as floods, storms, earthquakes, etc., and man-made disasters like strikes, riots, fires, etc.
- It tends to cover specific damages.
- Both the owner and tenant can buy a home insurance plan.
What does your home insurance plan cover?
As mentioned earlier, your home insurance plan covers your losses in the case of natural calamities and man-made disasters. However, it is worth noting that home insurance covers only specific damages. It is imperative to read the terms of your policy carefully before signing the document.
It is worth pointing out that home insurance plans are often sold as a part of home loans. If you apply for a home loan, you may be offered a home protection plan as part of the deal. Comparatively, home insurance costs less than home loan insurance.
Home loan insurance
A home loan insurance protects you when you are unable to repay your loan amount with interest. It also gives you the chance to borrow a large amount while keeping the down payment as low as possible. If you are unable to pay your loan amount in the future, your insurance provider will cover your liabilities.
Keep in mind that you have the option to choose between one-time payments and instalments. The premium amount you pay towards your home loan insurance depends on your age, health condition, and loan tenure.
Features of a home loan insurance plan
- A home loan insurance guarantees you and your family are protected when it becomes impossible for you to pay your EMIs.
- Your lender may not offer you protection in case of job loss, critical illness, or disability. Make sure to carefully read the documents to learn what is covered under your plan.
- A home loan insurance ensures that the bank does not possess your house and sells it to cover the losses.
- It is worth noting that your bank can not deny you a home loan because you refuse to take a package deal.
Home loan insurance is generally third-party products, and lenders package them in their home loan plans. Since it enables them to earn a profit, they also hard sell them. So, before opting for a home loan insurance, make sure to understand your needs. Also, if you want to repay your loan in a short tenure, getting home loan insurance may not be wise.
The benefit of getting home loan insurance is that you are eligible for tax deductions under section 80C of the Income Tax Act for paying your premium. However, you will not be able to claim tax benefits if you have borrowed from the bank to pay the premium.