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Buying a home for yourself is one of the many important goals we have. Understandably, you will take a home loan in order to realise your dream of having a house of your own in the future. But what if something happens to you? You surely, wouldn’t want your family to be burdened with any immediate loan liabilities or loan sharks troubling your loved ones for the payment of the loan amount. Hence, taking an insurance cover against your loan becomes important. You can choose between a term insurance plan or home loan insurance plan. But which one is better for you if you have availed a home loan and want some kind of security against it?
A term insurance plan can be availed for a limited period of time. It is generally cheaper in nature and aims to provide cover to you and your family. A term insurance can be a good idea if you have availed a home loan since your immediate loan liabilities will be cleared off if something happens to you provided the policy is still in force.
A home loan insurance as the name suggests aims to cover the insured and pays off the immediate loan liabilities in case of his/her unfortunate death. One of the many differences between a term and home loan insurance is that the latter is slightly expensive as compared to the former.
Whether you want to avail a term insurance or a home loan insurance depends on your long-term goals. We will try to compare both types of insurance and see which one is better.
The table below summarises the comparison between a term insurance plan and a home loan insurance
|Term Insurance Plan||Home Loan Insurance Plan|
|Affordability||Cheaper in nature, hence more affordable||Expensive in nature|
|Lender||Option to shift from one insurer/lender to another insurer/lender||Option to shift to another lender|
|Benefits||You can enjoy tax benefits under the Income Tax Act,1961.||You can only enjoy the tax benefits if you have paid your premiums. If the bank has covered it then you are not eligible for any benefits.|
|Coverage||The cover amount can remain standard. High chances that your cover amount will not reduce.||Cover amount reduces with each EMI.|
There are various insurers who provide term insurance plans as well as home loan insurance plans.
Some of the term insurance plans that you can purchase if you are availing a home loan are:
Some of the home loan insurance protection plans you can purchase if you are availing a home loan are:
In the end, we can see that it is very much recommended that you purchase a term insurance product rather than a home loan insurance protection plan. Not only is it cheaper when it comes to buying a term insurance plan, but you are also eligible for various benefits including tax benefits. In a home loan insurance, you may or may not be eligible for tax benefits. In case you are not satisfied with what the product has to offer, you can always choose to buy another term insurance plan from another insurer. Your term insurance has nothing to do with your loan amount and you can choose your cover amount based on your financial capabilities. In a home loan insurance, the cover provided will be equal to the loan amount and it only concentrates on ensuring that your loan amount is cleared.
Hence, purchasing a pure vanilla term insurance plan will be more helpful for you when it comes to clearing off your loan incase something happens to you.
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