A home loan is usually the biggest financial commitment in an individual’s life—often lasting 15 to 30 years. But what happens if the borrower faces a sudden emergency such as job loss, disability, or even death?
This is where home loan insurance becomes crucial.
Home loan insurance ensures that your outstanding loan amount is repaid if something unexpected happens, protecting your family from the risk of losing the house.
Here’s everything you need to know before buying one.
What Is Home Loan Insurance?
Home loan insurance (also known as Loan Protection Insurance) is a policy that covers your home loan liability in case you are unable to repay due to:
Death
Critical illness
Permanent disability
Loss of income in certain plans
Once the insured event occurs, the insurer pays the outstanding loan amount to the bank.
What Does Home Loan Insurance Cover?
Coverage depends on the plan, but typically includes:
✔ 1. Death Cover
If the borrower passes away, the insurer repays the remaining loan, ensuring the family keeps the home.
✔ 2. Critical Illness
Covers major illnesses like cancer, heart surgery, stroke, organ failure, etc.
✔ 3. Permanent Disability
If an accident leaves you unable to work, the insurance pays your remaining home loan.
✔ 4. Job Loss (Selective Plans)
Short-term coverage for temporary unemployment due to layoffs.
✔ 5. Optional Riders
Accident cover
Terminal illness
Hospitalisation benefits
Income support
Coverage amount generally reduces over time as your home loan balance decreases.
What Home Loan Insurance Does NOT Cover
Home loan insurance typically does not cover:
Pre-existing medical conditions
Suicide within the waiting period
Temporary disability
Self-inflicted injuries
Fraudulent claims
Business-related losses
Understanding exclusions is essential before purchasing a policy.
Types of Home Loan Insurance Plans
1. Term-Based Home Loan Insurance
A term plan linked to the loan amount—most economical.
2. Reducing Cover Plan
Coverage reduces annually as the loan amount decreases.
3. Level Cover Plan
Coverage remains constant throughout the loan tenure. Premium is higher.
Pros of Home Loan Insurance
✔ Protects Your Family from EMI Burden
Loan gets repaid if you face a crisis.
✔ Safeguards Your Home
Prevents loan default and property foreclosure.
✔ Single Premium Options Available
Banks often add this to the loan amount to reduce upfront payment.
✔ Tax Benefits
Premium may be eligible for tax benefits under Section 80C (for term-based variants).
✔ Peace of Mind for Long Tenures
Useful for 20–30-year loans.
Cons of Home Loan Insurance
✘ Premiums can be higher than pure term plans
Term insurance + home loan cover is usually more economical.
✘ Coverage reduces in some plans
Reducing cover may feel limited if financial needs change.
✘ Linked to lender
If you switch lenders (balance transfer), the policy may need closing or repurchasing.
Should You Buy Home Loan Insurance?
✔ You SHOULD buy it if:
You have dependents
Your loan amount is large
You are the primary earner
You want to secure your family’s home
Your job involves risk or health concerns
✘ You may SKIP it if:
You already have a strong term insurance plan covering your loan amount
You have independent financial backup or low liabilities
For most borrowers, home loan insurance + term plan together offer the best safety net.
FAQs
Q1. Is home loan insurance mandatory?
No. Banks may recommend it, but it is not compulsory.
Q2. Can I pay the premium in EMIs?
Yes, banks often club the premium into your home loan.
Q3. Is a term insurance plan better?
Term insurance is cheaper and offers broader protection. Home loan insurance specifically protects your property.
Q4. What happens if I transfer my home loan?
You may need to close the existing policy and buy a new one.
Q5. Can spouses be covered jointly?
Yes, many plans offer co-borrower joint coverage.
Published on : 15th November
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed