Skip to main content

Home Loan Insurance Cover

Invest Mutual Funds Online

Download Mutual Fund Application Forms

These covers are called Mortgage Redemption Schemes. The ones offered by banks fall under a group insurance scheme for borrowers of housing or vehicle loans. Typically, these are single premium term plans or pure life covers. The lender pays the premium to the insurance company as soon as your loan gets sanctioned. And adds the cost to your loan, which you pay in small parts with the equated monthly instalment. Such covers offer a sum assured worth the loan amount. The premiums are higher for longer duration loans, such as those for housing.

Options

Later, Varadarajan learnt he could have refused his lender and bought a cover separately, may be for a lesser premium. It is not mandatory to buy the cover from your lender. You can shop for a term plan yourself. Only, you'll have to buy a regular term plan, not a group cover. If Varadarajan had opted to buy a new cover for his loan, this 32-year-old would have to pay ~5,360 annually.

A separate cover need not always work out cheaper. For instance, if Varadarajan had to pay ~31,630 over 20 years, it would be a little over ~1,500 per year. Single premium plans work out a bit cheaper than regular premium ones.

The premium for a common group is decided on the average age the banking partner lends to. Given there are groups across ages, professions and so on, it is bound to work out cheaper.

It is also about ease of documentation, convenience of one-time payment and getting everything under one roof. Under the group scheme you can choose between reducing and level covers. Reducing covers lowers the premium, as the principal amount reduces, charging a lower premium. A level cover stays stagnant even if the loan amount reduces, like a term plan you buy separately.

If not single premium, which both insurers and borrowers prefer, we advise reducing covers as it is linked to the outstanding (due) and is easy on the borrowers pocket. It starts lowering as soon as the repayment starts. Borrowers, who have not bought a loan cover, can purchase one within four to six months of starting the repayment, but on certain conditions.

Varadarajan could have also attached an existing term cover, if any, to cover his home loan. Here, he would have been required to give his insurance papers to the bank at the time of filing the loan documents.

Reasons

Obviously, banks allow this if the term cover's sum assured is equal to the loan amount. "But, we discourage borrowers from giving an existing insurance policy, specially if he/she is the only bread winner in the house. One, because his/her family would also need financial help in the event of his/her death. Two, as partners to insurance companies, we also have a sales target to meet," says a private sector banker. If you have more than one term plan, you could opt for this route.

It may happen that the existing cover you want to attach to your home loan has a sum assured, which is less than your loan amount. In that case, you can attach two policies equal to the loan amount; Varadarajan has two life covers of ~10 lakh each. Or, you could attach one cover and buy another one equal to the differential between the sum assured and the loan, and attach both.

However, it is advisable you keep term covers for both these purposes separate. Keep one cover for your family to fall back on in case of any eventuality and take another cover to provide for your home loan.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

--------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

 

Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

NPS Investment Choice for Safe Investors

Invest NPS Online       Whether they invested through SIPs or put in a lump sum amount, risk-averse individ uals have earned the highest returns. These are investors who stayed away from stocks and divided their NPS corpus between G class gilt funds and C class corporate debt funds. On average, gilt funds have given 9.75% annualised returns while corporate debt funds have churned out more than 11% in the past five years. As a result, the average return for ultra-safe investors in the past five years is in double digits. Even in the short term, ultrasafe investors have been the biggest gainers among NPS investors. Will the good times continue? The gilt funds of NPS are holding long-term bonds with an average maturity of over 19 years and a modified duration of about 9 years.These funds have done well because interest rate cuts have pushed down bond yields. But experts say this trend will not stay forever. NPS is a long-term investment and the bonds are predominantly held to matu...
Read more

Buy Health Insurance Plan even if you are covered with my Employer

Buy Health Insurance Plan Online Yes, getting a private insurance cover now, which extends beyond your retirement age, is recommended There are a few reasons why buying a health insurance plan may make sense even though you get medical insurance from your employer. Here are the points you need to think about. Firstly, your employer's insurance coverage will only protect you as long as you are employed with the company. The policy will terminate when you quit the job or when you retire. Post retirement is perhaps the phase when one needs it the most but you won't have it then. Moreover, buying a new insurance policy after the age of 50 means that there will be no coverage for pre-existing diseases.   Lastly, health insurance policy you get from your employer may or may not cover your dependants. ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver M...
Read more

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...
Read more

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now