Skip to main content

Have you insured your home loan? - Home loan insurance

IT sounds the same, you might say, but there's a difference between home insurance and home loan insurance.

The difference

When you opt for home loan insurance, you will be insuring the home loan and not your home. That is, God forbid, if something were to happen to you (borrower), home loan insurance will take care of repaying the remainder of the loan to the bank. So, the burden of paying off the loan will not fall on the shoulders of the surviving family members. It will also prevent a situation where the home may need to be given up to the bank to help loan recovery.

For instance -

One takes a home loan worth Rs 30 lakh for 20-year loan tenure. He/She also takes an insurance cover for this loan. On the 18th year of his loan, Insured meets with an untimely death. The insurance company will pay the remainder of the principal, approximately Rs 9 lakh, to the bank. Thus foreclosing the loan.

What’s my premium?

Premium for this insurance cover varies for different insurance companies. However, the basic aspects that impact the premium required to be paid include: age, loan amount, loan tenure and the health of the individual taking the loan.

Usually, premium can be paid as a single payment or it can be added to the loan amount. The bank will factor this amount in the equal monthly instalment (EMI). Some insurance companies have the “limited pay” option, which means even if the loan cover is for 20 years; you could opt to pay the premium only for a period of 10 years with the actual cover extending for the entire loan tenure.

Smart tip: You are eligible to claim tax benefits under Section 80C for the premium paid.

How does it work?

The bank, where you take the home loan, usually, has a tie-up with an insurance company that provides the insurance cover for the home loan.

The bank will take care of all the requirements on your behalf. All you need to do is merely provide a letter of consent and make the premium payment or have it added to the loan amount.

What if I have a joint home loan -

In case of a joint home loan you can apply for a joint insurance cover. In this case, even if one of the co-borrowers dies, the remainder of the outstanding loan amount will be repaid to the bank.
Labels:

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Read more

Zero Coupon Bonds or discount bond or deep discount bond

A ZERO-COUPON bond (also called a discount bond or deep discount bond ) is a bond bought at a price lower than its face value with the face value repaid at the time of maturity.   There is no coupon or interim payments, hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures. Zero-coupon bonds may be long or short-term investments.   Long term zero coupon maturity dates typically start at 10 years. The bonds can be held until maturity or sold on secondary bond markets.
Read more

Mutual Fund Review: SBI Bluechip Fund

Given SBI Bluechip Fund's past performance and shrinking asset base, the fund has neither been able to hold back its investors nor enthuse new ones   LAUNCHED at the peak of the bull-run in January 2006, SBI Bluechip was able to attract many investors given the fact that it hails from the well-known fund house. However, the fund so far has not been able to live up to the expectation of investors. This was quite evident by its shrinking asset under management. The scheme is today left with only a third of its original asset size of Rs 3,000 crore. PERFORMANCE: The fund has plunged in ET Quarterly MF rating as well. From its earlier spot in the silver category in June 2009 quarter, the fund now stands in the last cadre, Lead.    Benchmarked to the BSE 100, the fund has outperformed neither the benchmark nor the major market indices including the Sensex and the Nifty. In its first year, the fund posted 17% return, which appears meager when compared with the 40% gain in the BSE 1...
Read more

Principal Emerging Bluechip

In its near ten year history, this fund has managed to consistently beat its benchmark by huge margins The primary aim of Principal Emerging Bluechip fund is to achieve long term capital appreciation by investing in equity and related instruments of mid and small-cap companies. In its near ten year history, this fund has managed to consistently beat its benchmark by huge margins. This fund defined the mid-cap universe as stocks with the market capitalisation that falls within the range of the Nifty Midcap Index. But, it can pick stocks from outside this index and also into IPOs where the market capitalisation falls into this range. Principal Emerging Bluechip fund's portfolio is well diversified in up to 70 stocks, which has aided in its performance over different market cycles. On analysing its portfolio, the investments are in quality companies that meet its investment criteria with a growth-style approach. Not a very big-sized fund, it has all the necessary traits to invest with...
Read more

Mutual Fund MIPs can give better returns than Post Office MIS

Post Office MIS vs  Mutual Fund MIPs   Post office Monthly Income Scheme has for long been a favourite with investors who want regular monthly income from their investments. They offer risk free 8.5% returns and are especially preferred by conservative investors, like retirees who need regular monthly income from their investments. However, top performing mutual fund monthly income plans (MIPs) have beaten Post Office Monthly Income Scheme (MIS), in terms of annualized returns over the last 5 years, by investing a small part of the corpus in equities which can give higher returns than fixed income investments. The value proposition of the mutual fund aggressive MIPs is that, the interest from debt investment is supplemented by an additional boost to equity returns. Please see the chart below for five year annualized returns from Post office MIS and top performing mutual fund MIPs, monthly d...
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