5 Reasons why you need Home Loan Protection

A lot of people have different opinions when it comes to home loan protection schemes. Some are of the opinion that home loan protection can be clubbed with existing term insurance. Some even state that schemes like these often harm the buyers more than they benefit. Home loan protection schemes act like term insurance. This insurance protects your family in case the person who has taken the loan expires. The protection cover, then claimed by the family, can be used to repay the outstanding home loan amount. The insurance protects you until the term of loan repayment. Why should we buy home loan protection schemes? What it is the utility of such schemes? Let us look into some reasons -

Protects the Family

If there is a sudden death in the family and it happens to be the individual who was repaying the loan, in that case, the family has to repay the outstanding loan amount. In case, the family is not able to do that, the house or the collaterals against which the loan has been taken will be seized by the bank to pay the outstanding loan amount. If there is a home loan protection available then this situation can be avoided. The family has to claim the loan protection amount which the insurance covers. In such a case, despite a loss of the loan bearer, the family is not without a home. Hence, this scheme is crucial if you want to protect your family in case of an eventuality.

To know your budget you need to take into account your current income and the possible future income. You need to take your savings into consideration and remember to set aside some funds for an emergency. This calculation can help you figure out your budget and then you are on your way to find your dream home.

Protects the Asset and other Collaterals

In case of the expiry of the loan bearer, the house and other valuable assets can be seized to repay the outstanding loan amount. Even if the family members manage to save the house, they would still lose their valuables. In such a case the home loan protection schemes protect the assets by repaying the outstanding loan amount. Hence, even if the loan bearer expires, it ensures that it is not at the expenses of the family or their standard of living.

Easy to Pay Premium

Home loan protection schemes acts like a term insurance. One-time premium can be paid for acquiring the scheme. There might be a situation where the loan bearer cannot afford the premium. In such a case, the premium amount is added to the loan amount and deducted through monthly or quarterly EMIs. For example, if the total loan amount is Rs 25 Lakhs and the one-time premium is Rs 2 Lakhs. Then the total loan amount becomes Rs 27 lakhs and the repayment occurs through EMIs. This makes it easy for the payment of the premium. Surrender facility, depending on the terms and conditions of the scheme, may be available for one-time premium payers.

Tax benefits and peace of mind

You can avail of tax deductions under Section 80C of the Income Tax Act 1961 on the premium you are paying for a home loan protection cover. However, this does not hold well if you have borrowed the premium money too and the amount is included in your monthly loan re-payment EMI.

You can hope disaster never strikes, but knowing that your most valuable asset, i.e. your home is protected even in the worst of a crisis is well worth considering this protection.

Offered along with the Home Loan

A buyer often tends to be confused because of the presence of so many similar products in the market. In case of home loan protection, it is usually offered along with the home loan. The financial institution from which the loan is being sanctioned will have a range of home loan protection schemes that you can avail. It is though not mandatory to buy these schemes and you always have the option to avail the scheme either along with the loan or at a later time from a different provider. The choice is completely yours!