Banks and NBFCs offer a host of loans to individuals, with a vast majority of the population having taken a loan at some point of time or the other. While a loan does offer financial relief, paying it back can often take time, with the onus of payment falling on the family of a borrower in case of his/her demise. The Mortgage Redemption Plan from LIC ensures that one’s family does not have to go through the burden of paying off a loan taken by a loved one.
Under this plan, the policy takes care of any outstanding loan/debt that a policyholder had taken, if he/she passes away during the policy term. It is ideal for individuals looking to restrict the financial burden of repaying a loan.
The Mortgage Redemption Plan is ideal for anyone who has availed a loan which needs to be repaid. LIC has set forth a few basic criteria for this plan, as highlighted below:
|Parameters||Criteria for eligibility|
|Minimum age at entry||20 years|
|Maximum age at entry||50 years|
|Maximum age at maturity||65 years|
Sum Assured – This is the amount which an insurer pays on the demise of the policyholder during the policy period. While in case of traditional policies the sum assured is paid to the nominee, in this case the sum assured is paid to the institute from which the policyholder had borrowed the amount. The quantum of the sum assured varies based on the loan amount taken, with it ranging from Rs.50,000 to Rs.10 lakh.
|Minimum sum assured||Rs.50,000|
|Maximum sum assured||Rs.10 lakh|
Premium Range – In order to avail protection under the plan, the policyholder is expected to pay a certain premium. LIC offers a range of premium payment modes, with the sum assured directly proportional to the premium.
|Premium payment modes||
|Premium amount||Depends on sum assured chosen|
*The premium varies based on the age of policyholder, sum assured, location, etc. With the implementation of GST the price of purchasing a policy has increased. Please check all rates at the time of purchase.
This is a special plan designed to offer financial protection against any unpaid loan. As such, it offers limited cover, as highlighted below:
|Maturity Benefit||There is no maturity benefit provided under this plan|
|Death Benefit||On demise of the policyholder while the policy is in force, the insurer will clear all outstanding loans. The amount payable depends on the schedule which was created at the time of purchase of policy.|
There are no rider options available with this plan.
There is an age-associated exclusion under this plan. According to rules, the loan should be cleared before the policyholder attains the age of 65 years. Any outstanding loan after this age will not be settled by the insurer.
Other Key Features
|Loan||No loan facility provided|
|Free-look period||30 days|
|Surrender value||No provision for surrender value|
|Partial withdrawal||Not applicable|
|Medical check-up||The applicant is expected to undergo a compulsory medical exam, the cost of which should be borne by him/her|
Purchasing this plan can help one save money on taxes. The premium paid by the policyholder is eligible for tax deduction under Section 80C of the Income Tax Act. The maximum amount which can be claimed is subject to the policies in force, and can vary from year to year.
It is advisable to consult a tax specialist to utilise all the benefits accorded by the government.
Everyone wishes to leave behind something for his/her loved ones. While it might not be possible to ensure this on all occasions, it is possible to ensure they are not burdened with repaying a loan taken by the individual. The Mortgage Redemption Plan provides peace of mind, knowing that any outstanding loan amount will be paid, with the onus of payment not falling on someone else.
With loans attracting interest, there are numerous cases of entire families struggling to repay a loan after the demise of the borrower. This can have an adverse impact on the overall quality of life, preventing family members from following their dreams.
Additionally, LIC is the biggest insurer in the country, having earned the trust of millions. It had one of the best claim settlement ratios during 2015-16, with it standing at 98.33%. This number ensures that the family of a deceased individual doesn’t run around in aims of having the settlement done.
Note: This plan has been withdrawn by LIC.