Buying a house is an important step in your life, and is probably one of the biggest investments you will ever make! Even if it means having to take a loan from a bank or getting an interest-free loan from your employer, having "your own home" is always worth it all! Moreover, having your own house feels like making a new start! Think about what your life insurance needs will be once you are settled. A little planning will help you secure your family’s future.
Like most new homebuyers, you have probably financed your purchase with a home loan. Simultaneously, you may want to ensure that you have enough life insurance to enable your family to pay off any existing loan on your home in case of any unforeseen events. By having adequate life insurance, you can be sure that your family will be able to own the house that you have acquired for them
Life Insurance and Buying a new house
Taken a loan to finance the home
My hard-earned savings have financed my new home
Taken a loan to finance the home :-
Many people are unable to or unwilling (due to the finance and tax sops available) to pay the entire purchase value of their house when they buy their new home. That is the main reason why many people take a housing loan for Buying a new house.
Why is life insurance important when taking a housing loan?
||Taking a housing loan may be convenient but read the fine print - it means that you own as much of the home as you have made principal payments for, the housing or finance company owns the rest.
||Making all the principal payments may take up to 10-15 years or even 20 years.
Having Life Insurance provides you with peace of mind so that your family gets all the financial support in case something unforeseen happens to you. This is where the proceeds of a life insurance policy would help. A life insurance may be used to payoff the remaining loan amount and keep the home for your family.
How much life insurance do you need?
Life Insurance needs in this case will depend on your loan amount. However, a few insurance companies do offer insurance policies that cover you for the loan amount only; For example, if your loan amount is declining on an annual basis - then there are insurance policies where your cover amount declines in line with the loan amount.
How can you buy a life insurance policy that takes care of your loan amount?
Most finance companies or housing loan companies expect borrowers to provide a security against their loans. The security provided usually is the asset - the house itself. However, a life insurance policy that is equivalent to the loan amount, assigning the benefits of the policy to the housing/finance company can be provided as security against the loan.
Moreover, a few housing companies add on an extra amount to the installment paid by the borrower. In the event of death of the insured during the term of the loan, the proceeds of the insurance policy payoff the balance amount to the housing or finance company.
My hard-earned savings have financed my new home :-
There must have been a lot of your accumulated savings that have been now locked up into your new house. Buying a new house feels like making a new start, so ensure that you have re-evaluated your insurance needs now that your savings have been locked in for a considerably long period.
The central purpose of life insurance is to provide secured future for you and your family.
The primary function of life insurance is to provide financial support to your family for a hassle free future. Based on your marital status, number of children, your debts and expenses, your need for income, your lifestyle and your goals for the future, you should take steps to protect you and your family