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Insurance Planning: Cover for Home Loan

 

   Home loan repayments form a substantial chunk of most borrowers' monthly income. Vishal is one of those borrowers who are walking on a tight rope budget. With a high interest personal loan and credit card debt also adding to his burden, Vishal is under stress. He is constantly afraid of losing his job and unsure of meeting medical emergency bills of his family.


   Some insurance products are structured keeping in mind home loan borrowers like Vishal. Some term products cover the sum insured subject to a maximum liability for a time period of say five years for illness, death of insured person etc.


   Most insurance companies compensate for loss of employment on account of retrenchment or layoffs. This is applicable for salaried employees only and the maximum liability of the company is three EMIs. So, the borrower can look for another assignment without worrying about raising money to repay the home loan dues for this time period.


   You can insure your house against damages from fire and other perils. Here, losses to the structure of the house and contents due to natural or man-made calamities are usually covered. Fire, earthquake, lightning, flood etc may be covered. On the contrary, there are exclusions to the cover that all borrowers must be aware of. They could include willful destruction of property, and wear and tear. Loss of valuables due to burglary is also covered under some products.


   Read the elements covered, and understand the limitations and exclusions of the policy. Compare products offered by different companies and settle for the one that suits your specific requirements.


   Self-employed people may not be eligible for cover against loss of employment. One is required to provide accurate details of his health condition. Usually, if a borrower has a pre-existing health condition, it will be excluded from the cover. Most products are usually given to individuals above 20 years and below 50 years of age.


   The premium charged depends on the age of the applicant, loan amount, loan tenure, occupation, medical history and sum insured.


   Home insurance policy covers the structure and contents of your home from natural and man-made calamities. Assess your insurance needs first.


   It is prudent for home loan borrowers like Vishal to start working on a contingency fund. Too many debts can push a borrower into a deep financial crisis. A contingency fund can be of extreme value in case of medical emergency or loss of job. Even if it is small money, start setting aside this amount month after month.

 

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